Brazilian Growth Headed For A Slowdown In 2023

• Fitch continues to expect that Brazilian real GDP growth will slow sharply in 2023, to 1.0% from an estimated 3.0% in 2022, as elevated interest rates and weaker external demand take their toll.
• Additionally, the agency expects that growth in Q422 will come in at 2.5% y-o-y (-0.2% q-o-q, seasonally adjusted), from 3.6% (0.4%) in Q322 a high-frequency data for the quarter suggests that activity has continued to deteriorate. In annual terms, Fitch’s 2022 estimate is down slightly from 3.1% previously.
• Most notably, the statistics agency (IBGE)’s economic activity index slipped from 4.5% y-o-y in September to 3.7% in October and 1.6% in November, while marking three consecutive months of negative month-on-month growth.
• However, solid fundamentals for private consumption and increased demand from Mainland China will prevent a sharper slowdown for Brazil. This bodes well for Marfrig’s performance in the near future given the increased demand from China, which is a major export market for the company.
• The most recent data suggests that Brazil’s private consumer remains fairly healthy in the near term, reflected in Fitch’s forecast for private consumption to lead all components with a 1.0 percentage point (pp) contribution to growth. Also, Brazil’s unemployment rate slipped to 8.1% in November 2022, the lowest level since February 2015, while consumer and services sector business confidence surveys are solid by post-pandemic standards, though down from highs earlier in the year.

(Source: Fitch Solutions)