Brazil’s economic growth slows in Q2 but beats forecasts

Brazil's economic growth slowed in the second quarter, expanding by 0.5% from the previous quarter, according to Brazil's statistics agency IBGE. This was slightly stronger than initially anticipated, despite elevated borrowing costs continuing to impact activity. The expansion in the April-June period surpassed the 0.4% forecast by economists.

On an annual basis, GDP grew by 2.0%, also beating expectations of a 1.8% increase. Agriculture played a significant role in the quarter's growth, expanding by 2.8% due to strong harvests in key crops such as soybeans and coffee. Services grew by 0.2%, while industry increased by 0.1%. These figures further indicate that economic activity is cooling as Brazil's central bank maintains restrictive monetary policy to curb inflation.

The annual inflation rate stands at 4.24% as of mid-August, surpassing the central bank's 3% target. Although the central bank began an easing cycle in March, Brazil's benchmark interest rate remains at 14%, one of the highest in real terms globally. The GDP data may garner attention ahead of Brazil's October presidential election, in which incumbent leftist President Luiz Inacio Lula da Silva is seeking a fourth non-consecutive term.