Brazil: High interest rates stop economy in its tracks in Q4
Tight monetary policy halts economic growth: The Brazilian economy decelerated sharply at the close of 2024, with GDP growth falling to 0.2% on a seasonally adjusted quarter-on-quarter basis in the final quarter of the year from a downwardly revised 0.7% in the third quarter. The print was the slowest expansion since Q3 2023 and missed market expectations, potentially prompting the Central Bank to hike less sharply in the coming quarters.
On an annual basis, economic growth slowed to 3.6% in Q4 from the previous period’s 4.0% expansion, and also undershot market projections. Accordingly, overall GDP growth in 2024 accelerated to 3.4% (2023: +3.2%), the strongest rise since 2011—bar 2021’s post-pandemic rebound.
Downturn was broad-based: The quarterly deceleration was broad-based and largely reflected higher inflation and tighter monetary policy cooling the economy. Domestically, household spending swung to a 1.0% seasonally adjusted quarter-on-quarter contraction in Q4 (Q3: +1.3% s.a. qoq), marking the worst result since Q2 2021; moreover, fixed investment growth fell to 0.4% (Q3: +2.3% s.a. qoq), marking the worst result since Q3 2023. Meanwhile, government spending growth ebbed to 0.6% in Q4 (Q3: +0.8% s.a. qoq).
On the external front, exports of goods and services declined at a quicker pace of 1.3% (Q3: -0.7% s.a. qoq). Meanwhile, imports of goods and services contracted 0.1% in Q4 (Q3: +0.9% s.a. qoq), marking the sharpest decline since Q1 2023.