The Brazilian Central Bank’s regional economic activity index (IBCR) reveals a significant 9 percent economic contraction in Rio Grande do Sul in May. This decline, attributed to severe floods impacting infrastructure, agriculture, and industries, marks the largest decrease since the index’s inception in 2002.
Despite the negative impact, recent data suggests signs of recovery. Retail sales saw a 1.2 percent year-on-year increase, while the lodging industry experienced a decline. Financial institutions and consulting firms estimate a potential 0.2 to 0.3 percentage point reduction in this year’s GDP due to the floods, but growth projections have improved slightly in recent weeks.
The International Monetary Fund revised its growth forecast to 2.1 percent, down by 0.1 points, largely due to the floods. However, analysts remain optimistic that the worst is behind, with GDP growth projections increasing steadily.
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