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. 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 performance of the last few months has 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 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. (Reporting by Marcela Ayres Editing by David Goodman and Raissa Kasolowsky)
