The 0.1% drop in Brazil’s Gross Domestic Product (GDP) in the third quarter, reported by the official statistics agency IBGE, was below the median of zero growth forecasts in a Reuters poll.
Brazil’s economic rebound after the worst phase of the Covid-19 pandemic stalled because Inflation soared to double digits, forcing the central bank to increase borrowing costs aggressively. Headwinds for the economy have weighed on the popularity of the far-right president Jair Bolsonaro, who is preparing to seek re-election in 2022.
The data reviewed showed a 0.4% drop in the second quarter, worse than the 0.1% drop previously reported. Two consecutive quarters of contraction meet the definition of a recession.
This year’s unusually dry weather also affected key Brazilian crops such as corn and coffee. The disappearance of reserves in hydroelectric dams raised electricity costs, which added to the shocks of high prices.
Agricultural production fell 8.0% in the third quarter, while industrial production remained flat and services advanced 1.1%.
“With tightening financial conditions and inflation at multi-year highs, the service sector is likely to weaken,” William Jackson, chief emerging markets economist at Capital Economics, told clients in a note.
Weak economic data could lead the central bank to keep up with interest rate hikes at your policy meeting next week, avoiding a larger increase than some experts had predicted, Jackson said.
Some economists are warning of a deeper recession next year. The market outlook for 2022 economic growth has fallen from 2.3% in June to less than 0.6% in the latest survey of central bank economists, released Monday.
Brazil’s economy ministry dismissed that consensus in a statement Thursday, reaffirming its forecast for GDP growth above 2% next year and pointing to recent job creation data as evidence of a resilient recovery.
Brazil’s unemployment rate fell to 12.6% in the third quarter from 14.2% in the previous quarter, data showed this week, hitting the lowest point since the start of the pandemic.
Compared to the third quarter of 2020, Brazil’s economy grew by 4%, as the IBGE data showed, below an average growth forecast of 4.2%.
Source From: Ambito
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