Latin America’s largest country Brazil’s economy rebounded with an expansion in eth third quarter to an extent that beat analysts’ expectations in the third quarter with a 0.6 per cent growth in its GDP. This also raised hopes of a cyclical recovery in the economy which is one of the largest in the world.
It is likely that Brazil’s top policymakers would get galvanized by the quarter-on-quarter result which includes the country’s finance minister Paulo Guedes who is trying to bring the economy on a growth path through a slew of sweeping measures such as deregulation and privatization.
“We are seeing a cyclical recovery,” said Sergio Vale, chief economist at MB Associados. “From now on we might see a faster recovery. Industry is still suffering from international headwinds, but there are some segments doing very well, such as agribusiness and real estate.”
“The slowdown in economic activity is behind us, and the economy is now growing more vigorously,” the country’s ministry of economic policy secretariat said in a statement. “Today’s figures show the economy heating up, which should be reinforced later this year. Christmas 2019 should be the best of recent years.”
The year on year growth for the period was at 1.2 per cent which was more than the expectations of analysts who predicted a growth of 0.9 per cent.
“Growth is still gradual because the Brazilian economy today is still picking up steam after a very severe recession,” said Luana Miranda, a researcher at the Brazilian Economy Institute, pointing to a years-long economic crunch between 2014 and 2016.
“As of the second quarter, Brazil had not recovered even half the GDP lost during the recession. We still have a very high unemployment rate, while business and consumer confidence are still very low. But things are going on. Families are consuming, investment is coming, but all slowly and gradually.”
The economy however still has some problems such as 11.6 per cent rate of unemployment in the country. Growth for 2019 is now forecast to be about 1 per cent and is expected to accelerate to above 2.2 per cent next year.
According to analysts, it is likely that the market will not look out for what is being done by the Brazil’s central bank to see whether interest rates are cut to record lows when it meets next week.
Last week, Brazil’s currency the real, touched record lows against the US dollar and analysts said that this was because of the lowering of interest rates in Brazil. Tariffs on Brazilian steel was slapped by US president Donald Trump on Monday because of the weakening currency as he accused Brazil of intentionally devaluing its currency.
“Given the weak pace of the recovery, the central bank will almost certainly — despite the recent fall in the currency and likely rise in inflation — lower the Selic rate to 4.5 per cent,” said William Jackson, chief emerging markets economist at Capital Economics.
(Adapted from FT.com)