Economic activity in Brazil declines again

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The Brazilian Central Bank’s economic activity index (IBC-Br), considered a reliable bellwether for official GDP data, suggests that the country’s economy contracted by 0.06 percent in September from August.

If the economy outperformed expectations in the first half of the year, it has done the opposite in recent months. The IBC-Br also fell short of market forecasts in August.

Over 12 months, the index is up by 2.5 percent — but the slowdown is flagrant.

Signs that the economy is losing steam are everywhere. Industrial production has been flat for 12 months. Retail sales are trending down. The services sector, which accounts for half of Brazil’s formal jobs and about 70 percent of the country’s gross domestic product, has contracted for two months in a row.

Earlier this year, Finance Minister Fernando Haddad said the country could face fiscal problems if economic activity continues to sputter, as it affects tax revenues.

Between January and September 2023, Brazil’s federal government reported an inflation-adjusted primary deficit of BRL 92.6 billion (USD 18.4 billion). This is the largest fiscal shortfall since the height of the pandemic crisis.

Despite the revenue woes, the government has put off the idea of asking Congress for a looser fiscal target in 2024, when it is supposed to deliver a zero-deficit budget. But analysts believe the idea should resurface in December, when lawmakers vote on next year’s budget, or early next year — when the Public Treasury reviews the public accounts.