The low growth of the Brazilian Gross Domestic Product (GDP) - which, last May, according to National Accounts published by the Brazilian Institute of Geography and Statistics (IBGE), increased 0.6% -, surprised analysts and reduced even further the average growth rate projected by economists from the Brazilian Institute of Economics (FGV / IBRE) for 2013. 

From a growth of 2.7% of GDP (estimated in the first quarter of this year) the number dropped to 2.3%.  For 2014, the forecast is that Brazil will grow a little more, 2.6%. Besides the poor economic performance of the country, add to it the high inflation scenario, which should be at around 6% by December.

According to Armando Castelar, coordinator of Applied Economics at IBRE, the economic outlook points to an adaptation on the growth, which may become more difficult due to internal and external pressures such as loss of credibility of monetary and fiscal policy, and a possible worsening in the external scenario.  We will grow slightly in 2013 and 2014, but we still have a labor market surprisingly well behaved.  However, the question remains, to what extent growth will continue so gradually in a scenery of low interest rates, expansionary fiscal policy and public credit at high levels?, inquired during the second IBRE Economic Quarter Analysis Seminar this the year, held on the 17th of this month.

The volume of investments in infrastructure is low

Silvia Matos, technical coordinator at IBRE Bulletin Macro, completed the Castelar's thought paying attention to the low volume of government investment in infrastructure, an important pillar for sustainable growth of the country:  Even with the stability of federal government investment, which has risen in recent months, investment in infrastructure, as a proportion of GDP, unfortunately contracted between 2012 and 2013.  So far, only 0.27% of GDP was spent in the year up to April.  This number is worse than the time of the crisis, in 2009, when it recorded 0.31%, said the economist to emphasize there is no room for counter-cyclical policies in Brazil.

Acceleration continues and services sector supports growth

Despite the not very optimistic projections of analysts, Regis Bonelli, Applied Economics researcher and organizer of the seminar, believes that this is not the end of the acceleration phase of the Brazilian economy.  The performance of the economy is much supported in the growth of the services sector which is still reasonable, it grew 1.7% in four quarters, as the industry has been in deficit for years, he said.

Source: IBRE/FGV