Brazilian GDP predictor suggests 2.3 percent growth in Q1

The Ibre-FGV GDP monitor, a tool to predict economic activity in Brazil, suggests that the country’s gross domestic product increased at a 2.3 percent annual rate in the first three months of the year. In relation to Q4 2023, growth is estimated at 0.7 percent.

Developed by the Brazilian Institute of Economics at think tank Fundação Getulio Vargas, the GDP monitor tries to anticipate economic trends by employing the same data sources and methodology used by the Brazilian Institute of Geography and Statistics (IBGE), which is responsible for official GDP figures.

All economic components showed growth, especially on the demand side. Historically the most important driver of growth in the Brazilian economy, household consumption increased by 4.4 percent from Q4 2023. 

Gross fixed capital formation — the measure of investment in GDP — grew by 3.4 percent quarter-on-quarter, intensifying the recovery that began in February. With the new cycle of monetary relief and reductions in interest rates, this component should continue to grow throughout 2024. 

“In most segments, more positive rates were recorded in the first quarter of this year than observed at the end of 2023. In general, this indicates a good start to 2024 for the Brazilian economy, even more robust than the growth of 2023,” said Juliana Trece, the GDP monitor’s coordinator.

On the supply side, exports of goods and services registered yearly growth of 6.8 percent in Q1. Imports of goods and services also increased in the period, by 11 percent, under the positive influence of services and intermediate goods — this growth may indicate greater demand from the manufacturing industry.

Ms. Trece recalled that the positive momentum is unlikely to continue through Q2, due to the not-yet-fully-assessed impacts of the tragedy in Rio Grande do Sul. Brazil’s southernmost state has been hit by catastrophic floods in the last two weeks. 

Material losses have so far been estimated at BRL 9 billion (USD 1.75 billion) by the National Confederation of Municipalities — but that amount is increasing every day.

“The impact will not be trivial. In addition to the direct effect on the state’s economy, there are secondary effects relating to the production chains in which Rio Grande do Sul participates and the efforts that are, and will be, made to rebuild the state, such as emergency aid for families and the beginning of reconstruction works in the state,” Ms. Trece pondered.

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