Brazilian economy grows in 2017, outlook for economy remains positive for 2018 and 2019

The Brazilian economy managed to record a growth rate of 1 percent for the whole of 2017, following a growth rate of 2.1 percent year-on-year in the fourth quarter. Even if the growth rate is not much spectacular, and follows declines of 3.5 percent in 2015 and in 2016, all the levers appear to be indicating in the same direction: that of continued economic growth. Real exports of goods and services rebounded 5.2 percent growth per year following a 9.1 percent year-on-year in the fourth quarter of 2017. Real imports of goods and services were also solid, but they negative contributed to the overall economic growth. Real imports rose 5 percent in 2017 and 8.1 percent in the fourth quarter of the year.

Personal consumption expenditures also recovered, rising 1 percent in the year and 2.6 percent year-on-year in the fourth quarter. Real government consumption and real gross fixed investment continued to fall in the year. Real government expenditures fell 0.6 percent last year, while real gross fixed investment dropped 1.8 percent. But the real gross fixed investment rose 3.8 percent year-on-year in the fourth quarter, the first year-on-year rise for this significant component of GDP since the first quarter of 2014.

The outlook for the Brazilian economy remains positive in 2018 and in 2019. As current levels are low, growth might not be entirely difficult to achieve, noted Wells Fargo in a research report.

“Our current forecast for Brazilian economic growth is 2.6 percent for 2018 and 3.0 percent for 2019. However, this implies a smooth political campaign and transition to a new administration next year, which means that we are assuming that Lula da Silva does not run for president, and/or if he does, is defeated during the second round. If he runs but is defeated, higher uncertainty could negatively affect our forecast for 2018, but will probably keep our forecast for 2019 relatively unchanged”, added Wells Fargo.

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