Labor market resilience, improved consumer confidence, and continued fiscal expansion will limit the slowdown in consumer spending

Given Brazil’s Q2 economic dynamics, FrontierView is revising its 2023 and 2024 GDP growth forecast to 3.0% and 1.9%, respectively

While FrontierView still expects Brazil’s economy to experience a slowdown due to still-tight monetary conditions, this will be much more moderate than initially expected. The latest results still highlight commodity sectors as resilient segments that multinationals should continue to prioritize, but they also tentatively show greater opportunities for consumer-facing multinationals. Companies should continue to try to capture this opportunity by catering to the existing price sensitivity and doubling down on cost-saving alternatives or focusing on higher-margin consumers, as they will remain resilient to still-high credit costs. 


Brazil’s economy grew 0.9% QOQ in Q2. While the results signal slight moderation from the outsized 1.8% QOQ growth registered in Q1, the results exceeded consensus expectations of 0.3% and point to the ongoing economic resilience. On the demand side, private consumption rebounded, up 0.9% QOQ after three quarters of deceleration, painting a much more robust consumer spending picture than what was portrayed by the 0.2% growth initially registered in Q1. Government spending accelerated for a second quarter, up 0.7% QOQ, whereas investment remained roughly unchanged at 0.1% QOQ. Exports soared 2.9% QOQ, likely boosted by earlier agricultural gains, while imports partially rebounded 4.5% QOQ. On the supply side, the agricultural sector saw a slight contraction of 0.9% QOQ, primarily due to the base effect after the shock growth of 21% QOQ in Q1. Services grew 0.6% QOQ, and, lastly, industrial activity grew 0.9% QOQ, aided by construction and mining activity.

Our View

Given the Q2 economic dynamics, FrontierView is revising its 2023 GDP growth forecast from 2.1% to 3.0%, primarily given the stronger-than-expected consumer spending dynamics. Ongoing labor market resilience, improved consumer confidence, and continued fiscal expansion continue to support private consumption (despite the high levels of household indebtedness) and signal that the lagged deceleration caused by tight monetary policy—while expected to continue in upcoming quarters—will not be as prominent as initially predicted. Continued fiscal expansion will help sustain household consumption in the short term (through higher social spending assistance and increases to the minimum wage); however, the need to comply with the recently approved primary balance targets will constrain government spending efforts in the coming year. For 2024, we have revised our growth forecast from 1.7% to 1.9%, mainly because of a higher carry-over effect and a more robust investment outlook. Investment has yet to show signs of a rebound on lower borrowing costs, but a continued interest rate decline and the already-announced programs aimed at increasing public infrastructure projects will allow investments to play a more significant role in Brazil’s growth story in 2024.

At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.

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