BRASILIA, Feb 16 (Reuters) - Brazil's economic activity increased by 2.9% in 2022, according to a central bank index released on Thursday, boosted by the services sector and defying earlier predictions of mild growth, but with recent months' performance showing loss of momentum.
After starting the previous year with a forecast of a 0.3% expansion for the Brazilian economy in 2022, private economists surveyed weekly by the central bank now project 3% growth, on the back of resilient services activity and a stronger labor market.
The IBC-BR economic activity index, a leading indicator of gross domestic product, rose 0.29% in December from November on a seasonally adjusted basis, surpassing the 0.1% growth forecast by analysts in a Reuters poll.
Compared to the same month in 2021, the increase was 1.42%.
The annual growth of Latin America's largest economy was also aided by increased government spending by former President Jair Bolsonaro, who boosted social expenses ahead of a presidential election.
However, the last few months have shown a clear slowdown, weighed by high borrowing costs aimed at combating inflation.
The IBC-BR index fell by 1.46% in the fourth quarter compared to the previous quarter, highlighting the challenges ahead for the leftist administration of President Luiz Inacio Lula da Silva, who has been calling for a reduction in the benchmark interest rate to unlock economic growth.
The country's interest rate has remained at a six-year high of 13.75% since September, after the central bank aggressively raised rates from a 2% record low seen at the beginning of 2021.
"The outlook for 2023 is for cooling activity due to high interest rates, exhaustion of the benefits linked to the reopening of the economy and uncertainties surrounding the external and domestic scenario for this year," said Rafael Perez, an economist at Suno Research.
The official GDP figure will be released on March 2. In 2021, Brazil's GDP grew by 5%, rebounding from the blow suffered during the previous year's pandemic.
For this year, the forecast of economists polled by the central bank is for a rise of 0.76%.
