|
Growth
accelerates at end of 2002 as industry and construction rebound but clouds
on horizon
Gross domestic product (GDP) grew by 1.5% in 2002, which was on target
with market expectations reflected in last month’s publication. Quarterly
data show that economic activity picked up notably in the second half of
last year, with growth accelerating in the fourth quarter to reach 3.4%
over the same period in 2001, which was up from the 2.5% expansion
observed in the third quarter. On a seasonally adjusted basis, GDP rose
0.7% in the fourth quarter over the previous quarter, just a notch below
the 0.9% rate registered in the third quarter.
On a sectoral basis, agriculture was the strongest growing sector last
year (+5.79%), followed by industry (+1.52%), whereas services activity
rose 1.49%. The strongest growth last year was observed in mining, where
activity grew 10.4% over 2001. Communications also expanded at a healthy
pace, registering 7.4% growth. On the downside, transportation and
construction activity declined for the year as a whole, experiencing a
0.9% and a 2.5% contraction respectively.
Although in aggregate terms, agriculture accounted for the strongest
growth last year and services output remained virtually unchanged
throughout the year, industrial output exhibited a strong burst at the end
of 2002 with growth reaching 6.9% in the fourth quarter over the same
quarter in 2001 (Q3 2002: + 3.0% year-on-year). Within the industrial
sector, the growth acceleration was particularly pronounced in the
construction industry, where the activity rose from a 0.9% decline in the
third quarter over the same quarter in 2001 to 6.2% expansion. Similarly,
in the manufacturing industry the expansion rose from 2.6% in the third to
6.6% in the fourth quarter.
Aggregate demand and supply data show that last year’s growth was
exclusively concentrated in the external sector, whereas the domestic side
of the economy remained weak. Public consumption added only 1.0% compared
to 1.0% in 2001. On the downside, private consumption dropped 0.7% in
2002, following a year of weak 0.7% growth in 2001. Similarly, investment
dropped off 4.1%, following a meagre 1.1% growth performance in the prior
year. Low domestic demand, resulting from exchange rate induced declines
in real incomes and higher interest rates drove down imports, which
declined a 12.8% on an annual basis. However, healthy export growth
sustained the economic expansion in 2002. For the year as a whole, exports
rose 7.8% compared to 11.2% in 2001.
Even though the currency is anticipated to stabilize somewhat this year,
the prospects for mounting inflation and a corresponding tighter monetary
policy are likely to maintain domestic demand subdued. In fact,
participants expect GDP growth to pick up only moderately this year to
reach 2.0%, which is unchanged from last month’s forecast.
Inflationary pressures mount amid higher fuel prices and currency
weakening
The mid-February consumer price index (IBGE-IPCA 15), which covers monthly
price increases up to the 15th of every month, rose 2.19% over January. As
a result, the annual inflation rate accelerated from 13.2% in January to
15.1% in February – the highest rate observed since August 1996. The
February increase was the result of increases in urban transportation
tariffs, gasoline prices and education costs. At current levels, inflation
substantially exceeds the official Central Bank target, which had been
recently raised by the new administration from 4.0% to 8.5%. In the
absence of any moderation in inflation, monetary authorities will have
little flexibility to lower interest rates. Participants see consumer
prices rising well above this year’s objective, reaching 11.9%, which is
up 0.7 percentage points from last month. The inflationary setting is
likely to improve somewhat next year but this month’s 8.8% figure for 2004
– 0.7 percentage points up from last month - still remains well above the
Central Bank target of 5.5%.
|
