Brazil: GDP Grows 0.8% in the First Quarter
The Brazilian GDP grew by 0.8% in Q1 2024, surpassing market expectations but below forecast. Internal demand, fueled by higher consumption and government initiatives, drove the growth. Consumption rose by 1.5%, and investments surged by 4.4%. Services and Agriculture sectors showed notable growth, while Industry remained stable. The government’s fiscal measures boosted the labor market, wages, and social transfers. GDP growth for 2024 is forecasted at 1.8%, with consumption expected to drive future growth.
Figure 1: Brazil GDP by Sectors (2019 =100, Seasonally Adjusted)
Source: IBGE
The National Institute of Statistics (IBGE) has released the GDP figures for the first quarter of 2024. The data show that the Brazilian GDP grew by 0.8% (q/q) during the first quarter, slightly above market expectations (0.7%) but below our forecast (1.0%). After half a year of stagnation, the Brazilian GDP has bounced back, driven especially by internal demand.
Figure 2: Brazil GDP by Demand (2019 =100, Seasonally Adjusted)
Source: IBGE
Consumption rose by 1.5% during the first quarter, boosted by increases in the minimum wage, strong employment numbers, and a rise in social transfers. Investment numbers also surprised, growing by 4.4% during the first quarter. In the external sector, exports grew by 0.2%, while imports grew by 6.8%, indicating the importance of the internal demand in the first quarter.
From a supply perspective, Agriculture actually surprised by growing 11.3% during the quarter, although on annual terms it has shrunk by 3.0%. Services grew by 1.4% during the quarter, contributing to most of the growth seen in the quarter. Industry remained stable, contracting by 0.1%. Construction contracted by 0.4%, Extractive Industry contracted by 0.4%, while Manufacturing grew by 0.7%, partially offsetting the other contractions in the sector. The growth in Services was driven by an increase in retail, which grew by 3.0% during the quarter, pushed by the increase in the Mass of Salaries. We also highlight the growth in IT activities (+2.1%) and rent activities (+1.0%).
A significant portion of the growth seen in the first quarter can be attributed to government initiatives. Consumption is rising due to the strength of the labor market, bolstered by government measures to increase the minimum wage and social transfers. The growth in investment was mostly related to state company investments in the extractive sector, which also partially explains the growth of the manufacturing sector and the stagnation in Construction. Most investments were likely in capital goods for the extractive industry.
Looking ahead, we expect the impact of the fiscal push to be more restricted throughout the year. We anticipate the floods in the southern region of the country to be confined to the second quarter, with no major spillovers to other regions. We expect Brazilian GDP to be driven by consumption in the coming quarters. Our forecast for GDP growth in 2024 stands at 1.8%.