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Brazil GDP Q4 2023

Brazil: Economy flatlines again in Q4 but undershoots market expectations

The Brazilian economy ended 2023 on a sour note; quarter-on-quarter GDP flatlined in seasonally adjusted terms in the fourth quarter, mirroring the third quarter’s outturn. Q4’s result missed market expectations of a sequential expansion.

On an annual basis, economic growth ticked up to 2.1% in Q4, from the previous quarter’s 2.0% increase. This brought the overall GDP expansion in 2023 to 2.9% (2022: +3.0%). The economy slowed only slightly in 2023 from the prior year, but the print was below both the government’s 3% target and market expectations as the economy felt the pinch of still-tight monetary policy. Nevertheless, it was a notable improvement from the 0.8% expansion markets had expected in early 2023.

The quarterly result was in part due to household spending contracting 0.2% on a seasonally adjusted quarter-on-quarter basis in Q4 (Q3: +0.9% s.a. qoq), marking the worst result since Q2 2021. Conversely, government consumption ticked up to a 0.9% expansion in Q4 (Q3: +0.6% s.a. qoq). Similarly, fixed investment also improved, bouncing back 0.9% in Q4 and contrasting the 2.2% contraction in Q3.

Turning to the external sector, exports of goods and services growth fell to 0.1% in Q4 (Q3: +2.8% s.a. qoq), marking the weakest result since Q2 2022. Conversely, imports of goods and services returned to growth with a 0.9% rise in Q4 (Q3: -2.1% s.a. qoq).

Regarding production, record soybean and corn harvests propelled the agricultural sector to expand by over 15% in 2023. This, coupled with a strong performance of the mining and quarrying sector on higher petroleum, natural gas and iron ore extraction, drove overall GDP growth in the year.

On a quarterly basis, growth is expected to make a comeback in Q1 after the economy flatlined for two consecutive quarters and to pick up steam through Q4 2024. The impacts of interest rate cuts trickling down to the real economy will provide some support to activity.

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