Brazil economy rebounds to pre-pandemic level, pointing to brighter 2021
Reuters
Published Jun 01, 2021 08:40AM ET
Updated Jun 01, 2021 01:11PM ET
By Jamie McGeever
BRASILIA (Reuters) -Brazil's economy grew by 1.2% in the first quarter, data showed on Tuesday, faster than economists had expected, as rebounding services and investments took Latin America's largest economy back to is size at the end of 2019, before the pandemic hit.
It was the third consecutive quarter of growth. While the rebound has slowed, underlying figures suggest strong foundations for a continued recovery, prompting upward revisions to full-year forecasts and a surge in Brazil's currency.
"This makes the outlook for the coming quarters very positive," said Jason Vieira, chief economist at Infinity Asset Management in Sao Paulo, calling the data "a really good set of numbers, especially fixed business investment."
Brazil's real rose to 5.15 per dollar, on track to close at its strongest this year. It is up 0.5% since Dec. 31, a sharp rebound since being down more than 10% year-to-date against the dollar in March.
Economy Minister Paulo Guedes said growth this year will likely be "very strong", and economists at Citi and Goldman Sachs (NYSE:GS) jacked up their 2021 gross domestic product growth forecasts to 5.1% and 5.5%, respectively.
"We expect the economy to recover visibly in coming quarters in tandem with further progress on the Covid vaccination front, gradual reopening of the economy, renewed fiscal stimulus, (and) recovering consumer and business confidence," Alberto Ramos at Goldman Sachs said.
Brazil's economic recovery has also helped accelerate inflation, prompting aggressive interest rate hikes. The central bank has raised its benchmark Selic rate by 75 basis points at each of its last two policy meetings, to 3.50%, and has indicated it will do so again next month.
Brazil's first-quarter growth was driven by services, industry and fixed business investment, official statistics agency IBGE figures showed. Agriculture grew by 5.7% in the quarter, its fastest pace in four years.
Government spending fell and manufacturing contracted. Household consumption fell less than expected, according to Vieira at Infinity, and is expected to stay surprisingly strong for the rest of the year.
The 1.2% growth rate in the January-March period from the previous three months was more than the median forecast in a Reuters poll of economists for 1.0% growth.
The range of forecasts from 27 economists was wide, indicating difficulty in assessing the impact of the end of emergency government aid payments to the poor on Dec. 31 and the onset of the COVID-19 pandemic's second wave.
Industry expanded by 0.7%, the dominant services sector grew 0.4% and fixed business investment rose 4.6% in the quarter, IBGE said.
Household consumption slipped 0.1% and government spending fell 0.8%, one of the biggest quarterly declines in years. Within industry output, the manufacturing sector shrank by 0.5%.
Get The News You Want
Compared with the same period a year earlier, GDP grew by 1.0%, IBGE figures showed, also more than the 0.8% rise forecast in a Reuters poll.
IBGE figures show economic activity is back to its pre-pandemic level at the end of 2019 but still 3.1% below its peak in 2014.
Economists warned, however, that tight fiscal policy, rising interest rates and continued uncertainty surrounding the pandemic and government's economic reform agenda were risks that point to much more subdued growth next year.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.