Brazil’s economy expanded less than analysts forecast for the fourth straight quarter, as the government struggles to rebuild investor confidence in the world’s second-biggest emerging market.
GDP grew 0.6 percent in the fourth quarter, slowing annual growth to 0.9 percent last year, less than any major emerging market, the national statistics agency said on Friday in Rio de Janeiro. The quarterly gain compares with the median estimate of a 0.8 percent expansion from 37 analysts surveyed by Bloomberg. Fourth-quarter GDP rose 1.4 percent from a year earlier.
Brazil’s economic expansion slowed for a second straight year last year, even as Brazilian President Dilma Rousseff’s government extended tax cuts, reduced the benchmark rate to a record, pressured banks to lower lending costs, courted private investment and weakened the currency. The extent of the measures has undermined investor confidence in economic policy and regulation, said Enestor dos Santos, senior economist for Brazil at Banco Bilbao Vizcaya Argentaria SA.
“There’s no clarity or confidence in economic policy, there’s an exaggerated interventionism,” Dos Santos said by telephone from Madrid. “What’s becoming evident is that it’s not interest rates, tax cuts or cheap credit that will revive growth but a recovery in confidence.”
Traders trimmed bets the central bank will increase interest rates this year even as inflation accelerated in the past five months to 6.18 percent in the middle of last month.
Price increases have exceeded the 4.5 percent midpoint of the bank’s target for more than two years.
“It is difficult to imagine the monetary authority justifying a hiking cycle with such disappointing growth performance,” Standard Chartered economist Italo Lombardi wrote in a note to clients on Friday.
The central bank has maintained the SELIC rate at 7.25 percent since October to avoid jeopardizing an incipient recovery without further fueling inflation. Policymakers, who meet next week to decide on interest rates, said in January they planned to keep the rate on hold for a prolonged period.