Brazil’s economy grew 3.4% in 2024, marking a significant recovery post-pandemic. However, growth slowed in the fourth quarter, showing only 0.2% increase, below expectations. Economists predict a further slowdown in GDP growth for 2025 as monetary policy tightens to combat inflation.
Brazil experienced a growth of 3.4% in 2024, the most significant increase since the post-pandemic recovery. This gain was bolstered by substantial investment and household consumption, driven by government initiatives aimed at enhancing disposable income. The latest figures, released by the government statistics agency IBGE, exceed market expectations for a more modest expansion, reflecting positive economic momentum under President Luiz Inacio Lula da Silva’s administration.
The growth observed in 2024 surpasses the 3.2% recorded in 2023, marking an improvement since the 4.8% growth in 2021. Nonetheless, the economy demonstrated signs of weakening towards the end of the year, with an expansion rate of merely 0.2% in the fourth quarter compared to the third quarter, falling short of the anticipated 0.5% increase reported by a Reuters poll of economists.
The fourth quarter’s growth rate of 3.6% also did not meet the projected 4.1%, indicating a potential cooling trend. Economists predict a further deceleration of GDP growth to approximately 2% for the current year, while the government expects a slightly higher figure of 2.3%. This slowdown is attributed to rigorous monetary policies aimed at curbing inflation, which concluded the previous year at 4.8%, exceeding the official target of 3%.
The central bank has implemented a series of interest rate hikes since September, totaling 275 basis points to reach 13.25%. An additional 100 basis-point increase is anticipated, as policymakers believe that factors such as a strong labor market, an expansionary fiscal policy, and robust credit growth have been sustaining consumption and overall economic demand.
In summary, Brazil’s economy achieved a robust growth rate of 3.4% in 2024, supported by significant investments and household consumption. Despite this, growth weakened in the fourth quarter, falling below expectations. The outlook for 2025 indicates potential further deceleration in GDP growth due to aggressive monetary policy aimed at controlling inflation. Policymakers remain vigilant to balance economic expansion and inflation targets.
Original Source: www.marketscreener.com
