Brazil’s economy is finally out of recession, with the country’s statistics agency confirming that the economy grew 1% last year.
Although the growth in GDP was largely due 13% growth in the robust agricultural sector, Latin America’s largest economy is now much less likely to slip back into recession. Inflation has calmed down, interest rates are at a record low, and people are no longer struggling to find employment.
Furthermore, peace has returned to the political landscape, with general elections scheduled for October this year. Private investment is also increasing at a steady pace, a sign that business confidence has improved significantly.
Car production in Brazil jumped more than 25% in 2017 from the previous year, as domestic sales rose and exports surged, according to the country’s National Association of Motor Vehicle Makers. the automotive industry has been both a driver and a beneficiary for the improved economy.
Overall industrial production has not grown much, but strong business confidence will spur growth in all sectors, say analysts.
In addition, agriculture growth looks set to continue into next year. Finance Minister Henrique Meirelles has told a press conference that the country is on pace to produce a record amount of crop this year.
However, enormous risks are still lurking around the corner. To free up cash for infrastructure spending, the government recently decided to reform the pension system, but had to shelve its plans due to political backlash. As a result, international ratings agency Fitch downgraded the country’s credit ratings significanty.
Pensions account for nearly half of the government’s expenses. Analysts believe that the ballooning pension fund might widen the fiscal deficit and leave little room for the government to maintain economic growth.