Brazil’s economy beats forecasts, grows 0.7% in Q4
February 28, 2014, 8:58 am

Despite rising inflation, consumer spending has continued to help boost economic growth in Brazil [Getty Images]

The figures released by the national statistics agency in Rio de Janeiro caught by surprise many experts, most of whom had predicted GDP contraction.

Brazil’s economy shrank by 0.5 per cent in the third quarter.

“It was a surprise even for the government,” said Finance Minister Guido Mantega.

Boosted by continued strong consumer spending and government monetary policies, Brazil’s GDP has grown by 2.3 per cent in 2013.

Thursday’s statistics are likely to give Brazilian President Dilma Rousseff a temporary reprieve as her government battles persistent inflation and currency devaluation – both of which have worked to slow down the economy.

They also come less than two weeks after Brazil’s central bank chief Alexandre Tombini said that the government’s approach to reducing inflation, and increasingof interest rates since last April, appear to be working.

He said that Brazil’s economy is resilient in the face of global economic changes, particularly the volatility in currency markets and the Federal Reserve’s tapering of its stimulus programme.

Brazil, like other BRICS and emerging economies, has used its foreign reserves to shore up its falling currency – the real – as foreign capital continued to flow out of the country.

In early January, the HSBC’s Purchasing Managers’ Index survey showed that manufacturing activity in Brazil had moved from contraction to expansion.

While only a small difference – from 49.7 in November to 50.5 in December, the positive change could allay the business sector’s worries about the stability of the Brazilian economy.

In a boost to consumer spending, the government announced in late December that it was raising the minimum wage by over 6 per cent.

Sources: Agencies