Brazil’s GDP grew 2.9% in 2022, but economy slowed in 4th quarter

The Brazilian GDP grew 2.9% last year, show data from the Brazilian Institute of Geography and Statistics (IBGE) released on Thursday (Mar. 2).

And in the fourth quarter, there was a negative variation of 0.2%, in relation to the previous three months, pulled by high-interest rates.

It is the second consecutive year of growth, after the 3.3% retraction of the GDP, in 2020 caused by the effects of the pandemic. In 2021, the Brazilian economy had a 5% expansion in GDP.

The GDP totaled R$9.9 (US$1.9) trillion in 2022. The GDP per capita reached R$ 46,154.6 in 2022, a real increase of 2.2% over the previous year.

SERVICES FASTEST GROWING

Services were the economic activity with the highest growth in 2022. The expansion was 4.2%, followed by industry, 1.6%.

Agriculture and cattle-raising closed in the red, with a drop of 1.7%, due to the decline in production and productivity in agriculture.

“Of this 2.9% growth in 2022, services accounted for 2.4 percentage points.”

“Besides being the sector with the greatest weight, it was the one that grew the most, which shows how high its contribution to the economy was in the year,” analyzes Rebeca Palis, coordinator of National Accounts at IBGE.

All service activities grew: other service activities (11.1%), transport, storage, and mail (8.4%), information and communication (5.4%), real estate activities (2.5%), administration, defense, public health, education, and social security (1.5%), commerce (0.8%), and financial, insurance, and related services (0.4%).

“The two activities that draw the most attention are among the fastest growing in 2021 after declines in 2020: Transportation and Other Services, which includes personal and professional services categories.”

“This was a continuation of the pickup in service demand after the Covid-19 pandemic. In other services, we can highlight sectors linked to tourism, such as food services, accommodation services, and car rentals,” explains Palis.

The industry’s positive highlight was the performance of electricity and gas, water, sewage, and waste management activities (10.1%), which had more favorable tariff flags throughout 2022.

“The growth of this activity is very much related to the recovery from the water crisis of 2021.”

“Besides the growth of the economy, there was the shutdown of thermal power plants, reducing production costs, which contributed to the increase in the value-added of the activity.”

Construction (6.9%) also registered growth, driven by the election year, which traditionally presents a higher volume of public works.

The transformation industries (-0.3%) had a negative performance, caused mainly by the drop in metallurgy of ferrous metals; metal products; chemical products; wood products, and rubber and plastic.

The extractive industries had a retraction of 1.7% due to the drop in iron ore extraction.

“Their result is related to the lockdown that occurred in China, the largest buyer, while the manufacturing industries were negatively impacted by factors such as high-interest rates and high raw material costs,” says Rebeca Palis.

The agriculture and livestock sector showed a drop of 1.7% in the year due to the decrease in production and loss of productivity in agriculture, which supplanted the positive contribution of livestock and fishing activities.

“Soy, the main Brazilian agricultural product, with an estimated production drop of 11.4%, was the main culprit in the year, impacted by adverse weather effects,” explains Palis.
Household consumption is the most significant influence from the point of view of demand.

On the demand side, the result was driven by household consumption, which advanced by 4.3% in the previous year. Government consumption expenditure, on the other hand, rose by 1.5%. In the external sector, exports of goods and services grew 5.5%, while imports rose 0.8%.

“If from the point of view of supply, it was the service sector that drove the increase, from the point of view of demand, it was household consumption.!

“It is important to divide domestic demand from the external sector because of the 2.9% of growth, 2 percentage points were from domestic demand, mainly from family consumption, and 0.9 percentage points from external demand, which also rose since our exports grew more than imports”, explains Rebeca Palis.

The gross formation of fixed capital, which measures the investment capacity of an economy, registered an increase of 0.9%.

The investment rate for 2022 was 18.8% of the GDP, while the previous year was 18.9%.

LOST STRENGTH IN Q4

GDP varied -0.2% in Q4 2022 compared to the immediately preceding quarter.

The industry showed a retraction of 0.3%, while agriculture, livestock, and services showed a positive variation of 0.3% and 0.2%, respectively.

Among the industrial activities, there was a drop in manufacturing (-1.4%), in construction (-0.7%), and in electricity and gas, water, sewage, and waste management activities (-0.4%).

The only positive result was in the extractive industries (2.5%).

“When we analyze the industry sector, the only increase was in the extractive industries because of oil extraction. All the rest fell,” evaluates the coordinator.

In services, information and communication activities (1.8%), other service activities (0.9%), financial, insurance, and related services (0.9%), real estate activities (0.7%), and transport, storage, and mail (0.2%) had a positive performance.

On the other hand, there was a drop in trade (-0.9%) and in administration, defense, public health and education, and social security (-0.5%).

On the expenditure side, there was a positive variation in household consumption expenditure (0.3%) and government consumption expenditure (0.3%), while there was a drop in gross fixed capital formation (-1.1%).

Exports of goods and services grew 3.5%, while imports of goods and services fell 1.9% in relation to the third quarter of 2022.