Brazil’S Economic Momentum Wanes As Multiple Sectors Show Weakness

2025-01-23 06:15:14

(MENAFN- The Rio Times) Brazil's Economy shows signs of deceleration as weak indicators raise concerns among market analysts. The Brazilian Institute of Geography and Statistics (IBGE) recently released data.

It revealed unexpected declines in retail sales and service sector volumes for November. This trend suggests a possible turning point in the country's growth cycle. Several financial institutions, including Bradesco, now consider a technical recession likely.

A technical recession occurs when the Gross Domestic Product (GDP) contracts for two consecutive quarters. More analysts may join this group as GDP forecasts trend downward.

The rapid increase in interest rates to curb inflation has increased the likelihood of a technical recession. Many analysts predict at least one quarter of contraction, preceded or followed by near-stagnation.

November's job creation figures also fell short of expectations, with only 106,600 formal jobs created. Industrial production declined by 0.8% in October and November combined.

These indicators suggest that Brazil 's above-potential growth rate may have reached its limit. The economy is expected to slow down gradually, starting with the last GDP result of 2024.

A record grain harvest, particularly soy, may temporarily mask this trend in the first quarter. However, as agricultural production effects fade, the economy will face the impact of higher interest rates.

The fiscal stimulus that supported growth in the past two years will also diminish. The potential technical recession highlights the challenges facing Brazil's economy . Policymakers are navigating the challenge of controlling inflation while stimulating growth.

In this context, businesses and investors must prepare for a period of economic uncertainty. The coming months will be crucial in determining whether Brazil can avoid a technical recession or if it will need to implement new strategies to revitalize its economy.

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