Brazil's exports and consumer spending propelled GDP activity in Q1

During the remainder of 2022, clients should expect to see inflation, rising cost of credit, and political uncertainty around a polarizing presidential election temper growth to a great extent. Therefore, despite the latest upward revisions, Brazil’s economic growth will remain below pre-pandemic rates with an expansion of 0.7% YOY. Firms should also prepare for slow growth in 2023 as Brazil will face heightened political disruptions, potential changes to its fiscal landscape, and weak consumer spending outlook after a year of continuously elevated inflation weighing on consumer dynamics. 


On June 2, Brazil released official GDP data for Q1 2022 showing an 1.7% YOY expansion. Compared to Q4 2019, the latest GDP results are 1.6 percentage points higher than the period immediately before the onset of the COVID-19 crisis. The results were better than expected, and as a result, we are raising our forecasts from -0.2% to 0.7% YOY for 2022. On the supply side, agriculture was the worst performing sector, contracting 0.9% QOQ. The result was largely explained by the 12.2% drop in soybean production. Although its performance was negatively affected at the beginning of the year due to the Omicron variant, recovery in the services sector accelerated in February and March, closing the quarter with a growth of 1% QOQ and 3.7% YOY. On the demand side, the highlight was household consumption with a 0.7% QOQ growth and 2.2% YOY. Domestic investment, recorded a 3.5% QOQ contraction due to weak demand for machinery and equipment, offsetting the positive contribution of civil construction.

Our View

The latest results posted by Brazil’s National Statistical Agency were better than FrontierView’s forecast of -0.2% QOQ. Overall, Brazil’s economy showcased a higher-than-expected resilience to the aggravated COVID-19 conditions in the beginning of the year, as well as the additional inflationary stemming from the war in Ukraine. As a result, we are raising our 2022 GDP forecasts from -0.2% to 0.7%. However, despite the stronger than expected performance in Q1, H2 will be marked by acute economic slowdown. Brazil’s quarterly GDP is expected to weaken in the second half of the year as high inflation, rising interest rates, political volatility, and global challenges with the war in Ukraine and a slowdown in China fully impact the country’s economy.

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