In 2022, Brazil's GDP grew 2.9%, that is, even more than was projected at the beginning of last year, but far short of what the world has advanced. The IMF's most recent estimate, released in Jan'23, points to a 3.4% global GDP increase and 3.9% for the set of emerging countries in Latin America.

The 2023 projections for the Brazilian economy reflect not only a challenging external scenario, but also the effects of the rise in interest rates by the Central Bank. There is also the cost of the countercyclical measures adopted in the midst of the electoral dispute by the government, such as the reduction in fuel taxes.

In its latest scenario, the IMF points to a slowdown in Brazil's GDP to 1.2% in 2023. The market expectations of national agents, collected by the Central Bank's Focus Bulletin in mid-Mar'23, indicate an even weaker pace for our economy: only 0.88%. As a result, our divergence from the world economy should widen, since global GDP is expected to register 2.9% this year, according to the IMF.

Throughout 2022, the continued loss of dynamism meant that Brazilian GDP, which had grown 1.3% in Q1'22, after adjusting for seasonal effects, ended the year in the red: -0.2% from Q3 to Q4'22, with adjustment. And this despite the reduction in fuel prices, the release of FGTS resources and the increase in Brazil Aid benefits, among other measures.

This worsening was greatly influenced by the loss of momentum of consumption and setbacks in the investment-industry pair, a factor that greatly compromises the future trajectory of expansion of our economy. Among the components of demand, the worst result came from investments, which fell 1.1% in Q4'22, after discounting seasonal effects. 

Among the components of supply, no other sector performed as poorly as the industry, which registered -0.3%, with seasonal adjustment, compared to 0.3% of agriculture and 0.2% of services. Even more serious was the picture of the manufacturing industry, with a drop of 1.4%, followed by retail trade (-0.9%). It should be remembered that manufacturing was flat in Q3'22 (0%).

If we take 2022 as a whole, the industry also shows a low performance, growing less than total GDP: 1.6% and 2.9%, respectively. Across its sectors, the results were quite asymmetrical. While construction (+6.9%) and electricity, water and sewage (+10.1%) grew strongly, manufacturing (-0.3%) and extractive activities (-1.7%) declined.

As agriculture (-1.7%) also did not grow, the expansion of Brazil's GDP last year was pulled by services (+4.2%), the only sector to record a better result than the total economy.

At the base of this performance is the recovery of services in households' consumption baskets, due to the resumption of face-to-face activities and of people's mobility with the control of the COVID-19 pandemic. Household consumption, which grew 4.3% in 2022, was the responsible for boosting the country's domestic market.

This factor of dynamism tends, however, to be exhausted as the pent-up demand for services is normalized, and because the purchasing power of households has also narrowed, due to inflation, rising interest rates and high levels of debt, giving rise to higher rates of default. So much so that in Q4'22, in the seasonally adjusted series, household consumption (+0.3%) and services (+0.2%) were practically stagnant.

What should be the main engine of the country's growth, investment—which in addition to demand also introduces the necessary modernization in the country's productive structure—had difficulties not only at the end of the year, but also in 2022 as a whole, with a variation of only +0.9%. As the IBGE itself points out, without the expansion of construction this result would have been much lower.

The share of gross fixed capital formation, that is, investment related to the acquisition of machinery and equipment, declined by 7.3% in 2022. This is not a good thing for increasing the country's productivity and future competitiveness. In addition, it is also likely that a relevant part of this decline is in the industry, since the physical production of capital goods for the sector has been falling repeatedly since Q4'21.

Alongside household consumption, the external sector was also an important source of dynamism, despite the weakening of the world economy. Our exports grew 5.5% in 2022, thanks to the increase in shipments of food and oil products, favored by the war in Ukraine, the automobile industry and pulp and paper. 

On the other hand, our imports registered a much less significant rise— 0.8% in 2022 as a whole—causing the external sector to contribute positively, with almost 1/3 of the GDP expansion in the year: 0.9 p.p. of the 2.9% increase, that is, the opposite of 2021, when it had subtracted -0.9 p.p. of the country's GDP growth.

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