Brazil Economic Report - December 2012
The national accounts data for Q3 2012 surprised on the downside, with the 0.6% q/q growth in GDP being only around half the pace that most analysts (including ourselves) were expecting. The main source of weakness was investment expenditure, which contracted sharply by 2% on the quarter, while consumer spending showed continued strength, with a robust 0.9% gain.
Although there are reasons for optimism regarding the longer-term outlook, growth in the near term will continue to be constrained by Brazil’s lingering competitiveness challenges. Following the disappointing GDP outturn for Q3 2012, we now believe that growth for 2012 as a whole will be just 1.0% and we have also revised down our forecast for 2013 to 3.9%.
Our downgrade to the GDP forecast mainly reflects a weaker outlook for investment spending. Following an estimated 4.1% contraction in investment in 2012 as a whole, we now forecast growth of just 2.7% in 2013. Consumer spending was the bright spot in the Brazilian economy during 2012 and we expect this strength to continue next year. Our forecast is for growth to accelerate to 4.3% in 2013 from an estimated 3.0% in 2012. What determines how much of this demand will be satisfied by local production, however, is the competitiveness of Brazil’s domestic producers.
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