The Brazilian economy grew 1.9% in the first quarter of 2023, the first of the new government of President Luiz Inácio Lula da Silva, compared to the last three months of 2022, exceeding market expectations.
The Gross Domestic Product (GDP) of the largest economy in Latin America grew 4% compared to the same period last year, announced this Thursday (1st) the IBGE (Brazilian Institute of Geography and Statistics).
In the last quarter of 2022, the economy had contracted by 0.1%.
“The result was driven, mainly, by the growth of 21.6% in agriculture, the highest increase for the sector since the fourth quarter of 1996”, detailed the IBGE.
“Climate problems had a negative impact on agriculture last year and this year we are expecting a record soybean harvest”, said Rebeca Palis, coordinator of National Accounts at the IBGE.
The growth surpassed market expectations for the quarter, which were 1.3%, according to the average of more than 70 estimates by consultants and financial institutions heard by Valor Econômico newspaper.
Lula took power in January with the challenge of stimulating the economy after a contraction of 0.1% in the fourth quarter of 2022, compared to the previous three months.
Despite the positive data, some analysts urged caution.
“A review of the first quarter numbers suggests that the economy is not as strong as the impressive 1.9% increase suggests,” said William Jackson, emerging markets economist at consultancy Capital Economics.
Even so, the consultancy revised its growth projection in 2023 from 1% to 2.3%.
To stimulate growth, the government of the left-wing president has pressured the Central Bank (BCB) authorities to reduce the interest rate, since August last year at 13.75%, the highest value since 2017 and the highest in the world in terms reais (discounting inflation).
The BCB implemented the strategy to mitigate the sharp rise in prices that has affected Brazil in recent times. But, on the other hand, the rate level threatens economic growth by making credit more expensive for businesses and consumers.
After several months in the two-digit range, the retail price indicator fell to 4.18% in the 12 months ended in April, a value that the government does not justify such a high rate.
– Doubts on the horizon –
In 2022, the last year of the right-wing Jair Bolsonaro’s term, Brazil recorded growth of 2.9%, after advancing 5% in the previous year, as a result of the recovery after the pandemic stopped.
When he presided over Brazil from 2003 to 2010, Lula was the protagonist of a vertiginous cycle of growth, driven by Chinese demand for exports of Latin American raw materials.
However, prospects are less optimistic for his third term, which began amid a slowdown in global growth.
The market projects an increase of 1.26% in GDP for this year, with estimates revised several times upwards compared to the forecast of 0.78% in January, according to the latest Focus survey by the Central Bank.
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