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Brazil GDP Q1 2021

Brazil: Activity slows in Q1, but still beats market expectations

GDP growth lost steam in the first quarter amid a renewed rise in Covid-19 cases, slowing to 1.2% on a seasonally-adjusted quarter-on-quarter basis from 3.2% in Q4 2020. That said, the result still beat market analysts’ expectations of a 1.0% increase. On an annual basis, the economy bounced back to growth in Q1, expanding 1.0%. This contrasted the previous quarter’s 1.1% contraction and marked the best result since Q4 2019.

Q1’s softer quarterly expansion was chiefly driven by a deterioration in the domestic economy. Private consumption contracted 0.1% in seasonally-adjusted quarter-on-quarter terms in Q1, contrasting Q4’s 3.2% rise, while public expenditure dropped 0.8% (Q4 2020: +0.9% s.a. qoq). Moreover, fixed investment growth slowed notably in the quarter, dropping to 4.6% (Q4 2020: +20.0% s.a. qoq).

On the external front, exports of goods and services rebounded in Q1 amid a more favorable external backdrop, growing 3.7% (Q4 2020: -1.1% s.a. qoq) and marking the best result since Q3 2018. Conversely, growth in imports of goods and services moderated to 11.6% in Q1 (Q4 2020: +19.3% s.a. qoq).

Commenting on the outlook for the Brazilian economy, Alberto Ramos, economist at Goldman Sachs, noted:

“We expect the economy to recover visibly in coming quarters in tandem with further (gradual) progress on the Covid-19 vaccination front, gradual reopening of the economy, renewed fiscal stimulus, recovering consumer and business confidence, and very favorable terms of trade and external backdrop in general. This should, however, be mitigated by rising interest rates, high inflation, and lingering political noise and policy uncertainty.”

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