Consumer spending in Brazil, a key growth drive in 2022, has begun showing signs deceleration

2023 will likely see a return to the country’s low-growth pattern of the past decade

While Brazil outperformed growth expectations both in 2021 and 2022, the country is set to experience an economic slowdown much more acutely in 2023. Amid the economic deceleration, flawless execution and intelligent use of resources will be key to meeting aggressive growth and profitability targets. MNCs should consider introducing new products and services to cater to more price-sensitive segments (particularly if growth continues to be the primary mandate). Additionally, consider maintaining a higher frequency of business review meetings, as 2023 will continue to be an unpredictable year from demand planning and inventory management standpoints. Finally, relative to its regional peers, Brazil certainly will not be the fastest-growing country, but it will continue to be the largest economy in the region, ensuring it remains central within MNCs’ LATAM strategic plans. 


Brazil’s economy contracted 0.2% QOQ in Q4 2022, slowing from 0.3% QOQ in Q3. On the supply side, services, representing a 59% share of the economy last year, decelerated to 0.2% QOQ, posting the slowest growth since the pandemic downturn in Q2 2020. On the demand side, household consumption decelerated to 0.3% QOQ, showing signs of waning consumption. Additionally, tightening financial conditions and softer confidence indicators played a role in gross capital formation’s contraction of 1.1 QOQ. Overall, Brazil’s annual 2022 growth closed at 2.9%, a decline from the 5.1% registered in 2021. 

Our View

Brazil’s Q4 results were aligned with market expectations, albeit slightly lower than those of FrontierView (a forecast of 0.1% QOQ). As the pandemic disturbances begin to normalize, we expect Brazil’s 2023 growth figures to showcase a return to the country’s low-growth pattern of the past decade. For 2023, we maintain our 0.7% growth forecast. Consumer spending, a key factor of growth in 2022, is expected to lose dynamism ahead of weakening labor market dynamics and the lagged impact of the central bank’s monetary tightening. Furthermore, moderating confidence figures and growing credit difficulties in the corporate sector will limit this year’s credit growth rate, negatively impacting investment growth. On the other hand, boding positively for Brazil, the country’s agricultural industry is poised to perform better in 2023 (notably with better corn harvests), and China’s global reopening could spark new demand for exports.

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