The Central Bank’s economic activity index (IBC-Br) is a valuable indicator of Brazilian GDP data. In April, the IBC-Br only increased by 0.01 percent, falling below the market consensus of 0.45 percent following a 0.34 percent decrease in March. However, the index has shown a 4.01 percent increase over the past 12 months, with a year-to-date increase of 2.08 percent.
The IBC-Br is composed of indicators that monitor production volume in agriculture, manufacturing, and services, as well as an index tracking taxes collected. This makes it a reliable indicator when analyzed over the long term. Despite the lower-than-expected monthly growth, many analysts remain optimistic about the Brazilian economy, as reflected in the forecasted 2.09 percent growth reported in the Central Bank’s Focus Report.
While analysts do not foresee further cuts to the country’s benchmark interest rate, projections for GDP growth in 2024 remain positive. Even though uncertainties related to recent floods in the southern region of Brazil could impact economic growth in the second quarter, Itaú analysts maintain their projection of 2.3 percent GDP growth for the year.
Brazil’s economy saw a growth of 0.8 percent in the first quarter, driven by the service sector and increased household spending, indicating a return to growth based on domestic demand. Looking ahead, Alberto Ramos, Goldman Sachs’s lead economist for Latin America, believes Brazil’s economic activity in 2024 will continue to benefit from fiscal stimulus, a rise in the minimum wage, and improvement in credit cycles. Despite challenges such as restrictive monetary conditions and policy uncertainty, the economy is expected to benefit from these positive factors in the coming years.