1970-01-01 00:00:00
The Brazilian economy ended 2023 and began 2024 very slowly, almost stopping, which would confirm, for now, the expectation of growth this year that should only reach half that of last year — around 1.5%, compared to 3% in 2023.
Institutes and consultancies estimate that the GDP (Gross Domestic Product) growth rate in the last quarter of 2023 was negative or very low compared to the previous three months. For the first quarter of 2024, the expectation is the same.
Ibre-FGV (Brazilian Institute of Economics of Fundação Getulio Vargas) estimates that GDP growth in the last quarter of 2023 was zero; and projects a drop of 0.1% in the first three months of 2024, always in relation to the previous quarter.
The Tendências consultancy estimates that there was a drop of 0.4% in the last quarter and predicts an increase of 0.5% in the first of this year. According to MB Associados, the numbers would be zero and 0.2%, respectively.
For Silvia Matos, coordinator of the Macro Ibre-FGV Bulletin, two aspects make growth in 2024 difficult. The first is that the so-called statistical carryover (or boost) of GDP from the end of 2023 to 2024 will be smaller than it was from 2022 to 2023.
At that time, this loading was 0.9%, which means that the economy would have grown 0.9% in 2023 even if activity stopped. Now, the momentum is just 0.2%, as there was a slowdown in the second half of last year.
Another point is that the so-called exogenous GDP — which includes externalities to the normal economic cycle — was 1.7% in 2023, driven mainly by the 16.2% increase in agricultural GDP. This year, the exogenous component would be just 0.5%, with an estimated drop of 3.4% in agricultural GDP, according to Ibre calculations.
Uncertainties regarding the country’s fiscal situation should also continue to weigh on productive investment decisions, despite the expectation of a drop in interest rates this year.
“The inspector went from water to wine, from a primary surplus [de 1,28% do PIB] in 2022 for a deficit in 2023 [de 1,27%, já descontados R$ 92,4 bilhões para o pagamento de precatórios]”, says Matos, who estimates a new deficit this year, of 0.8% of GDP.
Primary deficits or surpluses have direct impacts on the relationship between public debt and GDP, the main concept of a country’s solvency. When there is a surplus, public debt falls; and the opposite happens when there is a deficit.
For now, the Ministry of Finance’s target for this year’s fiscal result is zero deficit. For GDP growth, it calculates 2.2%, above the average of 140 institutions interviewed in the so-called Focus Bulletin of the Central Bank, which estimate 1.6%.
According to Alessandra Ribeiro, director of Macroeconomics at Tendências, it is possible that the economy will gain traction in the second half of the year, when the current process of reducing the basic interest rate (Selic) is more advanced.
“In 2023, we had a 2.5% drop in investments, which could increase by around 2.3% this year with the improvement in credit conditions, boosting sectors such as industry and civil construction”, he states. Last year, according to IBGE, the industry was stagnant, fluctuating 0.2% compared to 2022.
Predicting a 1.5% increase in GDP in 2024, Ribeiro states that it is difficult to say whether, after the atypical years of 2022 and 2023 — when the economy grew driven by a strong increase in public spending —, Brazil would have returned to “normal” , that is, at mediocre rates.
“Economists are struggling to understand whether the economy’s potential has changed because of the reforms approved since 2016 [como as trabalhista e previdenciária].”
In employment, for example, Brazil closed the last quarter of 2023 with an unemployment rate of 7.4%. In the formal market, there was a net balance of 1.4 million contracts. But 255.4 thousand of them (18%) were in contracts permitted by the labor reform, as intermittent, for less than 30 hours per week.
For 2024, Ribeiro estimates that the average income of workers will also grow less than last year: 1.5%, compared to 5% in 2023. In his opinion, this should negatively impact consumption. On the other hand, there has been a reduction in the level of household debt.
Felipe Tavares, chief economist at the National Confederation of Commerce in Goods, Services and Tourism, states that he recently revised downwards his expectations for GDP growth (to 1.1%) and commercial sales (1.6%) this year .
“In commerce, we depend 100% on GDP, on entertainment, on money in the consumer’s pocket, on credit on the street. When expectations are not so good, our sector feels it more”, he states.
“In 2023, there was a boom in positive surprises in the external scenario, with China, the United States and Europe growing above expectations. And we had a super harvest that will not be repeated. This tailwind made many people even ignore the current fiscal and the deterioration of public accounts. This year, this will weigh heavily”, says Tavares.
According to calculations by Sérgio Vale, chief economist at MB Associados, discounting expenses with court orders, government spending increased by 8% in real terms in 2023, essentially the result of the Transition PEC approved at the end of 2022.
This year, state spending (without court orders) is expected to grow much less, around 2% (R$41 billion), limiting its impact on the economy.
Vale estimates that, for the government to reach the zero deficit target this year, it would need to increase revenue by just over R$181 billion, “which certainly won’t happen”, he says.
“In the best case scenario, with a set of impacts via growth and fundraising efforts, the government can achieve half of that, R$90 billion”, he states — which would lead to a deficit of 0.8% of GDP.
For economist Nelson Marconi, coordinator of the Center for New Developmental Studies at FGV, one of the obstacles to accelerating growth is the low level of investment in the Brazilian economy.
According to IBGE, in the third quarter of 2023 (latest available data), the investment rate in the country was 16.6% of GDP, a drop compared to the same period in 2022 (18.3%). Many economists estimate that, for Brazil to grow sustainably, this rate should be closer to 25%.
For Marconi, even if the Selic continues to fall, the real interest rate (above inflation) will continue to be high in Brazil, impacting businesspeople’s choices between investing more in production or leaving the money yielding from the market. “In any case, with low investment, we will not see a significant recovery,” he says.
At the end of 2023, other activity indicators show, however, that there was growth compared to 2022.
Energy consumption in the commercial sector, for example, was around 11.2% higher, on average in November and December, compared to the same months in 2022. Residential, almost 13% higher in the same comparison, according to data from EPE (Energy Research Company), linked to the Ministry of Mines and Energy.
According to Thiago Ivanoski, director of EPE, part of the increase must be attributed to the more intense heat at the end of last year, which led to greater spending on air conditioning units.
In the paper and corrugated cardboard sector, used in packaging, sales growth in 2023 was 0.7% above 2022.
According to José Carlos da Fonseca Junior, executive president of the Brazilian Paper Packaging Association (Empapel), the sector is very sensitive to income and consumption, and their variations will determine the area’s performance.
Fonseca attributes some increase to changes in consumer habits, as online purchases require cardboard packaging to be delivered.
Finally, vehicle traffic at toll plazas on concessioned federal highways increased by 4.5% last year compared to 2022, according to data from the National Land Transport Agency.
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