Bumper soy harvest likely pulled Brazil out of recession in first quarter: economists

SAO PAULO (Reuters) - Brazil’s economy probably came out of recession in the first quarter almost exclusively thanks to a record soy harvest, economists said on Wednesday, forecasting a broader recovery to start later in the year.

Brazil’s agricultural output, which accounts for only about 5 percent of the country’s economy, may have risen as much as 8 percent in the first quarter from the last three months of 2016, according to private estimates, while industrial and services activity probably remained stagnant.

The economy as a whole grew by between 0.1 and 0.3 percent in the first quarter as a result, according to banks and research firms, ending a two-year-long recession that has been the deepest in the country’s history.

“If it wasn’t for that contribution (from agriculture), we would likely be forecasting another fall in gross domestic product,” said Rodolfo Margato, an economist with Santander Brasil, in São Paulo.

Agricultural output usually rises in the first few months of every year, but 2017 is projected to be a particularly good one thanks in part to expectations of a record soy crop. Brazil is the world’s largest soy beans exporter.

Brazil is also expected to be a relevant player in the global corn market this year as output recovers from a strong dry spell in 2016.

“We’re projecting an increase of 6.8 percent in agricultural output but we don’t rule out an even higher figure,” said Silvia Matos, a researcher at the Getúlio Vargas Foundation think-tank.

Brazil’s economy shrank 3.6 percent in 2016 and is expected to grow about 0.5 percent this year, according to a weekly survey of economists by the central bank. Agricultural output is forecast to grow 5.8 percent in 2017 from 2016, while industrial GDP is expected to rise 0.8 percent and services are projected to fall 0.1 percent, the survey showed.

Aside from agriculture, industrial output is expected to pick up speed in coming months, before services activity, economists said. Service providers, which account for about 70 percent of Brazil’s economic output, have struggled with record-high unemployment.

Writing by Silvio Cascione; Editing by Sandra Maler