David Biller Rio de Janeiro
BRAZIL’S economy unexpectedly grew in the fourth quarter, as consumer spending offset declines in investment and industry, keeping the economy from recession in 2014. Swap rates rose.
Gross domestic product GDP) rose 0.3 percent from the three previous months, versus a median forecast for a 0.1 percent contraction from 41 economists surveyed by Bloomberg, and down from a revised 0.2 percent growth in the third quarter.
Analysts who had forecast stagnation for full-year 2014 were surprised by growth of 0.1 percent, down from a revised 2.7 percent in 2013. The national statistics agency used a new methodology to arrive at the GDP numbers.
Brazil’s President Dilma Rousseff’s government is struggling with above-target inflation, a sinking currency and a record budget deficit as the central bank raises rates.
Rousseff and Finance Minister Joaquim Levy have pledged to tighten fiscal discipline in order to lay the foundation for sustainable growth.
Economists forecast an economic contraction this year, the first since 2009.
“The better-than-expected number in the fourth quarter is good news, but the drivers of that growth give some cause for concern, particularly the excessive and continued reliance on consumer spending,” said Neil Shearing, chief emerging markets economist at Capital Economics.
“There’s no sign here of the kind of rebalancing that needs to be at the heart of a sustainable recovery.”
Swap rates on the contract due in January 2017 closed Friday up six basis points to 13.53 percent. The real fell 2.1 percent to 3.2497 per dollar and has weakened 18.2 percent this year, the most among 24 emerging market currencies tracked by Bloomberg.
The fourth quarter posed a challenge for economists because of the agency’s new methodology. Friday marked the first release of quarterly GDP data with the system.
The new tabulation follows recommendations of international bodies including the Organisation for Economic Co-operation and Development, International Monetary Fund and the World Bank, and brings Brazil in line with best international practice, according to Shearing.
Because of the changes, the question of whether the economy last year contracted slightly or eked out some growth became less relevant, he said. – Bloomberg