Brazilian economic growth likely to continue expanding strongly in 2018

The Brazilian economy recorded strong growth in 2017. According to a BNP Paribas research report, the economy is likely to continue experiencing strong growth this year as well. The real GDP had grown 0.1 percent sequentially on a seasonally-adjusted basis and 1.4 percent year-on-year, bring the carry-over impact to 1 percent in the whole of 2017. Meanwhile, the first and second quarter data were upwardly revised.

Private consumption and exports continued to boost the Brazilian economy in a more favorable international environment. Investment has regained strength after a 16-qarter decline, materializing the recovery in business sentiment indicators throughout 2017.

Imports in Brazil rose to 6.6 percent, explaining why foreign trade contributed negatively to the economic growth. Sector wise, the upturn in industrial activity continues to be fragile, while activity in the services sector appears slightly stronger after three quarters in positive territory. After an excellent first half performance, agricultural activity had contracted in the third quarter.

Given the still sluggish economic growth, a largely negative output gap, rapid disinflation and a more stable Brazilian real, the authorities were able to pursue a major monetary easing cycle, noted BNP Paribas. IPCA inflation reached 2.95 percent year-on-year in December 2017, falling below the central bank’s target range of 4.5 percent for the first time. The central bank cut its key target rate again in December to 7 percent.

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