Brazil Economy and Tourism: Subdued Growth

According to World Travel and Tourism Council (WTTC), tourism in Brazil contributed above 6% to the GDP in 2021.

Tourism is responsible for creating one in every 11 jobs in the country. It is expected that the tourism sector will continue to grow further with the projected increase in the foreign arrivals from 222 million in 2021 to 300 million in 2023.

Brazil’s economy is projected to remain subdued in 2023, with several factors such as slower employment growth and tighter lending conditions expected to constrain consumer spending and investments. Against this backdrop, the country’s economic growth is set to slowdown from 3% in 2022 to 0.8% in 2023, forecasts GlobalData, a leading data and analytics company.

According to the Brazilian Institute of Geography and Statistics, the employment rate declined to a four-month low of 56.7% in January 2023. Along with this, the Central Bank had increased the policy rate by 450 bps during the period from January 2022 to February 2023, which is further impacting the economic expansion and domestic demand.

The increase in the cost of borrowing discourages individuals from taking out loans to make large purchases, such as homes, cars, or other big-ticket items. Real household consumption expenditure, which grew at an average of 3.8% during 2021-22, is forecast to slow down to 1.6% in 2023.

Government unveiled its first set of economic policies in January 2023, outlining several suggested tax increases and spending reductions with the goal of reducing the primary deficit to or below 1% of GDP, according to a GlobalData report. Also, if central bank reduces policy rate, the refinancing cost of servicing debt will also decline, which will aid in narrowing the overall government deficit.

In terms of sectors, mining, manufacturing, and utilities contributed 19.8% to the gross value added (GVA) in 2022, followed by financial intermediation, real estate, and business activities (15.6%), and wholesale, retail, and hotels sector (15%). The three sectors are expected to grow by 7%, 6.5% and 4.7%, respectively, in 2023, slower compared to 9%, 8.3% and 6.1% in 2022.

On the infrastructure side, data service provider of Brazil, Odata, received a loan of $30 million from IFC (a member of the World Bank Group) in January 2022 to expand the data center infrastructure to a wide range of industries and enhance the nation’s digital resilience along with sustainable economic recovery.