Brazil's economy is undergoing a soft landing as consumers tighten their purse strings to cope with high indebtedness on post-pandemic purchases and increasing financial costs, a Reuters poll of economists showed.
Economic activity got a boost this year from President Jair Bolsonaro's extra public spending measures aimed at improving his reelection chances before a final runoff vote on Oct. 30 that will decide who wins the top job.
However, Brazilians are now hitting the brakes in the face of rising interest rates on piles of outstanding personal debt, a side effect of the central bank's tough anti-inflation policy stance.
Gross domestic product is set to increase just 0.8% next year compared with 2.7% in 2022, according to median estimates in a sample of 39 economists polled Oct. 4-13. In July, analysts had forecast growth of 0.8% in 2023 and 1.4% this year.
Bolsonaro has launched a debt pardon for consumers who splurged when activity normalized after the coronavirus pandemic. His challenger, former President Luiz Inacio Lula da Silva, has also proposed debt forgiveness. Around 68 million Brazilians were blacklisted by credit score agencies in August due to debt in arrears. State bank Caixa Economica Federal expects to restructure around 1 billion reais ($190 million) in overdue credits.
With prospects for capital spending and foreign trade also under a question mark amid challenging international conditions, investors hope the next administration will renew Brazil's vow of fiscal restraint that Bolsonaro breached ahead of the vote.
