Brazil’s GDP up 1.2% in Q1 over Q4 2020, returning to pre-pandemic levels

RIO DE JANEIRO, BRAZIL – The Brazilian Gross Domestic Product (GDP) grew 1.2% in the 1st quarter of 2021, compared to the previous quarter, according to the Brazilian Institute of Geography and Statistics (IBGE). In current values, GDP totaled R$2.048 trillion (US$393 billion).

The IBGE figures have confirmed that the Brazilian economy began the year expanding, albeit with a slowdown in the pace of recovery, after growing by 3.2% in the 4th quarter of 2020. Compared to the first quarter of 2020, GDP grew by 1%.

The result was above expectations. The median of projections by 55 financial institutions and consultants was for an increase of 0.7% compared to the 4th quarter, and for 0.5% compared to the 1st quarter of 2020.

In 12 months, the economy still down

Despite 3 consecutive quarters of recovery, the economy has not yet managed to reverse the record 9.2% plunge recorded in the 2nd quarter of 2020. In the cumulative 12-month period, GDP still registered a 3.8% drop, compared to the four immediately preceding quarters.

Main highlights of 1st quarter GDP (positive unless -negative)

Services: 0.4%
Industry: 0.7%.
Farming: 5.7%
Family Consumption: -0.1%
Government Consumption: -0.8%
Investments: 4.6%.
Exports: 3.7%.
Imports: 11.6%
Construction: 2.1%.

Agriculture and cattle-raising were the chief growth sectors

The 3 major economic sectors posted growth in the first 3 months of the year, compared to the fourth quarter 2020. The largest growth was recorded in agriculture and cattle-raising (5.7%), followed by industry (0.7%) and services (0.4%).

Among industrial activities, growth was driven by Extractive Industries (3.2%). Construction (2.1%) and electricity and gas, water, sewerage, waste management activities (0.9%) also posted positive rates. Only manufacturing industry shrank (-0.5%).

In Services, there were positive results in transport, storage, and mail (3.6%), financial intermediation and insurance (1.7%), information and communication (1.4%), trade (1.2%), real estate activities (1.0%), and other services (0.1%). The only drop was recorded in public administration, health, and education (-0.6%).

Investment grows and household consumption drops

In terms of capital expenditures, investments rose 4.6%, while Household Consumption Expenditure (-0.1%) and Government Consumption Expenditure (-0.8%) posted negative variations in relation to the preceding quarter.

In the external sector, Exports of Goods and Services grew by 3.7%, while Imports of Goods and Services grew by 11.6% over the 4th quarter 2020.

Outlook for the year

Despite the still high uncertainty and concerns related to the pandemic and the pace of vaccination in the country, economic indicators have positively surprised in recent months, leading to upward revisions in the projection of GDP growth in 2021.

Last week, the financial market raised its estimate for the economy’s growth in the year to 3.96%, with several analysts now projecting growth above 4%. The Ministry of Economy’s official estimate points to 3.5% GDP growth in 2021, but Minister Paulo Guedes says that Brazil could grow between 4.5% and 5%.

The Organization for Economic Cooperation and Development (OECD) on Monday maintained its 3.7% growth projection for Brazil, and pointed out that the country should grow less than the world average.

In 2020, the first year of the pandemic, the Brazilian economy fell 4.1%, recording the largest contraction since the start of official IBGE records in 1996, which caused Brazil to fall from its position among the world’s 10 largest economies.

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