Brazil’s economy rebounded more than expected in the second quarter, boosted by consumer spending and a rebound in services, providing a tailwind for President Jair Bolsonaro in his quest for re-election in the October elections.
The Gross Domestic Product (GDP) of Latin America’s largest economy expanded 1.2% in the three months to June, government statistics agency IBGE reported, better than the 0.9% growth forecast in a Reuters poll of economists.
It was the fourth consecutive quarter of growth, lifting economic activity 3% above its pre-pandemic level, and just shy of its all-time high in the first quarter of 2014.
Bolsonaro, who trails leftist former President Luiz Inácio Lula da Silva in opinion polls, has focused his efforts on economic initiatives to boost his popularity, boosting cash handouts to low-income families and adopting fiscal measures. to curb inflation.
The fuel tax exemptions were due to expire this year, but after a campaign compromise, the president has already extended them through 2023 in a budget bill sent to Congress.
Second quarter GDP was mainly underpinned by a 1.3% increase in services. The sector, which has reacted strongly after the blow suffered by the pandemic, accounts for 70% of the economy.
At the same time, industry expanded 2.2% and agriculture grew 0.5%.
“The result shows a consolidation of the resumption of economic activity, even with the impacts of the conflict in Eastern Europe and the persistent effects of the pandemic,” the Ministry of Economy said in a statement.
Echoing the recent speeches of Minister Paulo Guedes, who predicted that the economy would grow more than 2.5% this year, the ministry said that activity has been supported by the good performance of services, the recovery of employment and a high level of private investment.
Brazil’s jobless rate fell to 9.1% in the quarter through July, the lowest level in nearly seven years.
William Jackson, chief emerging markets economist at Capital Economics, revised his forecast for economic expansion this year to 2.5% from 2% after the second-quarter growth report, but stressed that “the economy is likely to weaken during the second half of the year.”
Activity grew 3.2% from the second quarter of 2021, beating a forecast for a 2.8% advance.
IBGE also revised first quarter Gross Domestic Product (GDP) performance to a 1.1% expansion from a 1.0% rise previously reported.
