Brazil’s Economic Growth: Strong 2024 Performance Followed by Fourth Quarter Slowdown

Brazil’s economy grew by 3.4% in 2024, the highest since post-pandemic recovery, despite a slowdown in the fourth quarter, which expanded only by 0.2%. Economists predict GDP growth may decline to 2% in the coming year due to restrictive monetary policies aimed at reducing inflation, which ended 2024 at 4.8%.

Brazil’s economy exhibited a commendable growth rate of 3.4% in 2024, marking the most substantial increase since the post-pandemic recovery. This growth surpassed market expectations, owing to considerable advancements in investment and household consumption facilitated by government initiatives aimed at increasing disposable income. This represents an acceleration from the 3.2% growth documented in 2023 and stands as the highest growth rate since the 4.8% recorded in 2021.

However, the economy demonstrated signs of deceleration in the fourth quarter of the year, achieving only a 0.2% growth compared to the third quarter, which fell short of the 0.5% anticipated by economists in a recent Reuters poll. The previously reported growth for the third quarter was also revised down to 0.7% over the preceding quarter.

Year-on-year, the fourth quarter’s growth of 3.6% was below the expected 4.1%. Current forecasts by economists suggest a further slowdown in GDP growth, estimating a reduction to 2% for the upcoming year, while the government’s forecast stands at 2.3%. This anticipated deceleration is attributed to stringent monetary policies aimed at controlling inflation, which closed 2024 at 4.8%, exceeding the official target of 3%.

Since September, the Central Bank of Brazil has enacted a significant interest rate increase of 275 basis points, bringing rates to 13.25%. Further hikes of an additional 100 basis points are anticipated, motivated by a robust labor market and policies designed to sustain consumption and aggregate demand.

In summary, Brazil’s economy achieved a notable growth of 3.4% in 2024, boosted by strong investments and household consumption, yet experienced a slowdown in the fourth quarter. The anticipated GDP growth for the coming year indicates further deceleration due to aggressive monetary measures aimed at curbing inflation. The Central Bank’s actions reflect the government’s commitment to maintaining economic stability while managing inflationary pressures.

Original Source: www.marketscreener.com