A report showed Brazil’s economy expanded in the fourth quarter at a slower pace than forecast. GDP grew by 0.6% q/q in the fourth quarter of last year, meaning that the economy grew by just 0.9% over last year as whole.

Here is what Capital Economics’ Neil Shearing had to say about the weak numbers:

“Brazil’s recovery grinds on, but the pace of growth is still disappointingly sluggish. Unless or until investment becomes a bigger part of the economy, growth is likely to be lacklustre and inflation will remain relatively high. We are nudging down our forecast for growth this year to just 3%.

Growth of less than 1% in 2012 represents a poor return on the massive stimulus that has been injected into the economy.

The sluggish response of growth has its roots in the imbalances that have been allowed to build in the economy over the past few years.

Consumer spending has been supported by a large run-up in credit and a period where real wages have grown ahead of productivity. Neither of these props can last forever.

For now, we expect the central bank to resist raising interest rates in the expectation that inflation starts to edge down in late Q2 as last year’s food shock unwinds. Our forecast therefore remains for rates to remain unchanged this year. But it’s a close call. Any sign that inflation is likely to prove more sticky than policymakers currently expect could trigger interest rate hikes.”

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9 Responses to Lackluster Recovery: Brazil GDP grew by just 0.9% over 2012

  1. gringo nao sabe nada says:

    Last year Mantega predicted growth of 4% doing his job trying to talk up the economy. We see the results at 1%. What has changed? Where is the additional investment going to come from? FDI, some but not enough. The PAC? That has been the promise of the past 3 to 4 years but government budget is ham strung. Spend more without productivity equals inflation. Credit and consumerism may be overextended. Housing? There is a need but is what is being built match the need? Futbol construction? Olympics. Maybe the best hope is informal economy and the real activities outside of the unreal world where the government is your “partner”.

  2. frank stein says:

    Where is the money going to? BNDES Is in the hole for at least 15 billions with Eike Batista and his X companies without any revenues to pay the debt as far as the eye can see. There are several failed companies receiving money from BNDES. No productive investments to speak of. What about the Sao Francisco project? Soccer stadiums? The hole is getting deeper and deeper, wider and wider.

  3. Satan from Garanhuns says:

    Nice nickname ” gringo não sabe nada. ” Since I was a child I noticed that all foreigners economists or even spies who lives in Brazil are unable to understand what really is this country.
    Congratulations your nickname is the very core about how I figure they are.

  4. Brazilian says:

    There are only a couple things “gringos” need to know: the current administration in Brazil is massively incompetent, and the previous president is the most corrupt and cynical person ever to breath.

    Once you understand these two key facts, it is easy to make sense of what is going on in Brazil right now.

  5. Mandy says:

    Silly German

  6. frank stein says:

    Brazil is already in stagflation and it will get worse. Government is twisting arms to delay layoffs. Morons believe infrastructure deficits of hundreds of years will be built in less than 5 years.

  7. gordon says:

    Hey, how about an article and research/analysis about the current 5 real estate funds that stopped paying dividends. Surprise this site has not took the lead on that story???? what up????

  8. Gordon says:

    thks! So what is the explanation for the earnings drop? is it that they were earning capital gains on buy and sell? are there losses on property values? do they hold excess inventory not earning a return (rental income)? were they lending to developers who cant sell units anymore? Is it a revenue issue (stated above) or expense issue (inflation in property costs in excess versus incomes? any clarification is helpful. thks!

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