Brazil’s Second Quarter Economic Growth Better Than Expected

Brazil’s Second Quarter Economic Growth Better Than Expected
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Brazil recorded a better-than-expected economic growth for the second quarter this year. The government stimulus revitalized investments and the outlook for manufacturing in the country.

Brazil's Second Quarter Economic Growth Better Than Expected

Brazil reported GDP of the country increased

The national statistics agency in Brazil reported that the gross domestic product (GDP) of the country increased by 1.5% during the quarter. The growth rate was the highest since the first quarter of 2010. The country’s annualized growth was 6%.

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Analysts project that Brazil will achieve a growth rate of 0.9% in the second quarter based on data compiled by Bloomberg.

Brazil’s President, Dilma Rousseff, implemented different strategies to revive the economy of the country, such as reducing payroll tax and improving subsidized lending to companies. Brazil suffered economic slowdown for two years.

Luciano Rostagno, chief strategist at Banco Mizuho do Brazil SA commented that the economic growth in the country was driven by investments and consumption last year. Currently, Rostagno said the country has a “better mix of growth. So yes, the measures had some positive effects on the economy, but the problem is inflation remains high.”

Brazil’s inflation rate is near the 6.5% upper limit set by the government. The Brazilian real declined more than any other major currency over the past three months. The central bank announced a $60 billion intervention program to reduce the volatility in the foreign exchange market, and it is projecting a growth rate of 2.2% this year and 2.4% next year.

Bradesco BBI projected that Brazil’s growth rate for 2013 will be around 2.6%. The firm raised its previous forecast of 2.2% because of the decline of the Brazilian real and payroll tax breaks.

On the other hand, Goldman Sachs Group Inc (NYSE:GS) projected that Brazil’s performance in the third quarter will be flat, based on leading indicators.

Investments in Brazil climbed by 3.6% in the second quarter

Brazil’s Finance Minister, Guido Mantega said the government is targeting a growth rate of 4% for 2014 and he emphasized the worst. According to him, the improvement of the economic situation internationally bodes well for the country to achieve its target growth. He maintained the 2.5% forecast for this year.

Investments in Brazil climbed by 3.6% in the second quarter, but is still one of the major emerging markets with the lowest investment rates at 18.6% of GDP. Mantega is confident that the conditions that drove the increase in investments will remain, including a large reduction of investment costs, reduction of taxes, and low cost of financing.

Brazil’s agriculture surged by 3.9% and exports went up by 6.9%. The government expects the manufacturing industry to prosper because of weaker currency.

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