Brazil’s economy disappointed in the third quarter of 2012. The GDP of the leading Latin American power grew by a meagre 0.6% compared with the second quarter of the year and by 1% year-on-year, half the growth forecast by the consensus. This has reawakened doubts regarding the extent of the Brazilian economy’s structural problems, as well as forcing us to lower our growth forecast for 2012 as a whole, from 1.5% down to 1.0%.
On the demand side, the worst figures came from investment which fell for the fifth consecutive quarter, down 2% on the second quarter, -5.5% in year-on-year terms. Unlike the performance of gross fixed capital formation, household consumption stood its ground and grew by 0.9% compared with the second quarter. Although this trend is expected to continue over the coming quarters, it will not be enough to significantly improve the GDP growth rates without support from investment.
Undoubtedly, this unexpected setback in the third quarter has hit Brazil’s government hard and it has spared no effort in using stimuli to boost the private sector, resorting both to fiscal incentives and also reducing the high energy tariffs, among many other measures of support.
Nonetheless, the economy is continuing along the same lines: given these figures, Brazil’s President, Dilma Rousseff, quickly announced a new and significant investment plan totalling 20 billion euros to improve the country’s port infrastructures. Also announced was a reduction in the long-term interest rate (TJLP) of the national development bank (the Banco Nacional de Desenvolvimento Econômico e Social or BNDES) of 50 basis points, down to 5.5%, as from January 2013 with the aim of stimulating depressed investment by lowering financing costs. All this is in addition to the 53 billion euro investment plan announced in August and the numerous cuts in the SELIC rate since August 2011.
Nonetheless, the economy is continuing along the same lines: given these figures, Brazil’s President, Dilma Rousseff, quickly announced a new and significant investment plan totalling 20 billion euros to improve the country’s port infrastructures. Also announced was a reduction in the long-term interest rate (TJLP) of the national development bank (the Banco Nacional de Desenvolvimento Econômico e Social or BNDES) of 50 basis points, down to 5.5%, as from January 2013 with the aim of stimulating depressed investment by lowering financing costs. All this is in addition to the 53 billion euro investment plan announced in August and the numerous cuts in the SELIC rate since August 2011.
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