(Bloomberg) — Brazil’s economy emerged from recession at the end of 2021, providing limited relief to a country hit by above-target inflation and aggressive interest rate hikes at the start of an election year.
The gross domestic product grew 0.5% in the October-December period after registering falls in the two previous quarters. Overall, the economy expanded 4.6% last year, the national statistics agency said on Friday.
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Brazil’s economy grew at the end of 2021, but outlook ahead is grim
Latin America’s largest economy grew in 2021 due to fewer Covid-19 restrictions and also greater access to vaccines that allowed Brazilians to return to their pre-pandemic lives. Now, a host of factors from high borrowing costs and unemployment to double-digit inflation are dragging down both projections and President Jair Bolsonaro’s popularity ahead of October’s election.
Global issues such as supply chain disruptions are affecting Brazil’s industry and, along with demand for major commodities like oil and soybeans, are also helping to drive consumer prices above 10%. In response, the central bank has raised the benchmark Selic rate by 875 basis points, to 10.75%, since last March.
The bank’s efforts have yet to significantly curb inflation. To further complicate matters, traders are increasing their bets that borrowing costs will rise above 13% amid the global food and fuel price crisis from the conflict in Ukraine, a factor that would increase pressure. about consumers.
To cushion economic hardship, Bolsonaro has once again expanded cash transfers to the poor. The aid has heightened investor concern about the state of Brazil’s public finances and has done little to boost lackluster projections.
According to analysts surveyed by the central bank, the economy will grow just 0.3% this year and 1.5% in 2023.
original note:
Brazil Economy Exits Recession in Small Respite Before Election
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