GDP grows 1% in the first quarter in Brazil

The Brazilian GDP (Gross Domestic Product) grew 1% in the first quarter of 2022, compared to the three immediately previous months, according to data released this Thursday (2) by the IBGE (Brazilian Institute of Geography and Statistics).

The performance was slightly below financial market expectations. In the median, analysts consulted by the Bloomberg agency projected a rise of 1.2%.

GDP seeks to measure the production of goods and services in the country each quarter. The advance of the indicator is usually called economic growth.

The 1% advance is the third positive result in a row, after the decline in the second quarter of 2021 (-0.2%).

With the performance, GDP was 1.6% above the level of the fourth quarter of 2019, pre-pandemic period, and 1.7% below the highest point of economic activity in the country, recorded in the first quarter of 2014.

This Thursday’s result came in a context of lifting restrictions on activities after the damage caused by the pandemic.

Part of sectors such as services, the main part of GDP, had been paralyzed in the most critical phases of the health crisis. With the process of reopening the economy, there was room for improvement over the last few months.

It was the service sector that pulled GDP up in the first quarter, according to the IBGE. The segment’s high was 1% compared to the end of 2021.

“Within services, the greatest growth was in other services, which rose by 2.2% in the quarter and include many activities of services provided to families, such as accommodation and food. Many of these activities are in-person and had repressed demand during the pandemic “, said the coordinator of National Accounts at IBGE, Rebeca Palis.

Industry, in turn, was relatively stable, with a small change of 0.1%. Agriculture, on the other hand, dropped 0.9%.

“The scenario of the first quarter is of an economy emerging from the pandemic. Services had a more vigorous recovery”, evaluates the chief economist at the MB Associados consultancy, Sergio Vale.

Economist Luca Mercadante, from Rio Bravo Investimentos, follows the same line.

“The process of economic recovery has generated longer effects than initially expected. This is the main point”, he says.

On the eve of the electoral race, the federal government bet on measures such as Auxílio Brasil, in an attempt to stimulate consumption in a period of escalating inflation, analysts recall.

The weak GDP comparison base is one more factor pointed out to explain the indicator’s performance in the first quarter.

Finally, the advancement of employment in the labor market, even with the average income falling, is also cited as a possible stimulus for the economy at the start of the year.

Breath loss projection

Analysts, however, warn of a possible slowdown in GDP throughout 2022, especially in the second half of the year.

Until then, a greater effect of high interest rates and persistent inflation on consumption, the engine of economic growth, is projected.

Uncertainties in the Brazilian electoral race and in the external scenario, in the midst of the Ukrainian War and the change in US monetary policy, emerge as additional threats.

“From now on, the expectation is a little more negative. The effect of high interest rates in Brazil has a lag to appear. It should get in the way in the second half, and expectations for inflation have worsened”, analyzes Mercadante.

The most recent Focus bulletin, dated April 29, showed a financial market projection of a 0.7% increase in GDP in 2022, according to the BC (Central Bank), responsible for the publication.

There are financial institutions that predict a stronger advance, close to or above 1%. At the beginning of the year, estimates were lower, around 0.3% in the median.

These projections improved with signs of more heated activity throughout the first quarter.

However, analysts consider that the reaction of GDP, an indicator of production of goods and services, is not always felt by the population to the same extent. This is the current case, according to Vale, of the consultancy MB Associados.

“The population is suffering from inflation and unemployment is still high. Thus, it is difficult to see a better life. Unemployment has fallen, but remains in double digits, as well as inflation”, he says.

“Recovery will occur when we have higher GDP growth and lower inflation and unemployment.”

CALCULATION OF GDP

Products, services, rents, utilities, taxes and even contraband. These are some of the components of GDP, calculated by the IBGE, according to international standards. The objective is to measure the production of goods and services in the country in a given period.

The indicator shows who produces, who consumes and the income generated from that production. GDP growth (discounting inflation) is usually called economic growth.

The survey is presented from the perspective of supply (what is produced) and demand (how these products and services are consumed). Quarterly GDP is released approximately 60 days after the end of the period in question.