Brazil back to its typical growth formula

After practically six months of stagnation, the Brazilian economy bounced back to growth in the first quarter of 2024, according to the national statistics institute (IBGE). The country’s gross domestic product increased by 0.8 percent between January and March compared to the previous quarter, slightly above the median market expectations of 0.7 percent per Bloomberg’s consensus, and 2.5 percent year-over-year. 

Unlike 2023, when record agricultural output and its positive impact on exports generated a carry-over effect that guaranteed an annual GDP expansion well above initial projections, the first quarter of 2024 brought a more typical portrait, with the services sector and household consumption driving the economy. “We had an economic growth entirely based on domestic demand,” said Rebeca Palis, the GDP survey coordinator at IBGE — something expected in a Luiz Inácio Lula da Silva government.

While growing by 11.3 percent quarterly, agriculture’s results dropped by 3 percent compared to the first three months of 2023 due to the loss of productivity in some crops, such as soybeans (-2.4 percent) and corn (-11.7 percent), mainly caused by bad climate conditions. “An annual drop was already expected due to last year’s record harvest. Still, we expect a positive performance from the sector throughout the year,” says Claudio Hamilton, an economist at Brazil’s Institute for Applied Economic Research (Ipea). Other crops, such as sugar cane, coffee, and orange, can compensate for lower grain production. In the worst-case scenario, the sector would remain stable, which is already...