Brazil and Mexico surprised investors with stronger-than-expected growth, according to data released on Friday (28), indicating that the largest economies in Latin America are holding up amid high interest rates and accelerating inflation.
The economic activity of Brazil (GDP) rose 3.3% in February, according to the country’s central bank, about three times the increase of just 1.05% predicted by analysts in a Bloomberg survey. Meanwhile, the Mexican economy grew 1.1% in the first quarter compared to the previous three months, also above the average of 0.8% forecasted by the same survey. On a year-over-year basis, Mexico expanded by 3.9%.
The numbers caught investors by surprise, as the central banks of both countries maintain a tight monetary policy to curb inflation above target. The new government in Brazil, under President Luiz Inácio Lula da Silva, is working to renew credit flows, while Mexico received a boost from ongoing demand from the United States.
Both economies have aggressively raised interest rates to tame post-pandemic inflation, with Brazil’s borrowing costs at 13.75% and Mexico’s at 11.25%, which are among the highest rates in the G-20 group.
The Mexican economy recorded six consecutive quarters of growth, the longest period under President Andrés Manuel López Obrador. The expansion was supported by the services sector, which grew 4.4% year-on-year in the first quarter, while manufacturing increased by 2.7% and the agricultural sector by 2.4%.
In Brazil, the agricultural sector was the biggest driver of growth.
Goldman Sachs Group Inc raised its forecast for Mexico’s GDP growth in 2023 to 2.1%, up from 1.8% after the data was released.
Source: Buenos Aires Times