Decline in consumption and increase in tariff flags impact electricity in GDP, says IBGE.

247 - The Brazilian Institute of Geography and Statistics (IBGE) released, this Tuesday (2), the national accounts for the second quarter of 2025, highlighting the contraction in the electricity sector within the Gross Domestic Product (GDP). According to Rebeca Palis, head of the National Accounts Department at IBGE, the drop observed in the area was caused by lower energy consumption, coupled with the increase in tariff flags, which made the cost of electricity higher.

In the second quarter of 2025, the production and distribution of electricity, gas, and water showed a 4% reduction compared to the same period in 2024. Furthermore, the electricity, gas, water, and sewage segment, as well as waste management activities, registered a 2,7% decrease compared to the first quarter of this year. "These declines indicate that the sector did not operate robustly during the period," explained Palis, highlighting that, generally, when a segment shows a contraction in GDP, this indicates a slowdown in its economic activity.

Another factor influencing this performance was the drop in residential energy consumption, which decreased both in relation to the first quarter of 2025 and the same period in 2024. This phenomenon was directly impacted by the milder temperatures recorded between April and June, resulting in less use of appliances that consume large amounts of energy, such as fans and air conditioners. "The cooler weather in the months of April, May, and June contributed to this lower electricity consumption," stated the economist.

Furthermore, Palis mentioned that the variation in tariff flags, which are adjusted according to the level of hydroelectric reservoirs, also impacted the cost of energy. With below-average rainfall and lower hydroelectric power generation, thermal production, which is more expensive, was intensified. "We've had drought problems recently, which led to greater use of thermal power plants. Since thermal generation is more expensive, this was reflected in the increase in tariff flags," the expert highlighted.

In the first quarter, Brazil was operating under the green flag, with no increase in the tariff value. However, in the second quarter, the more expensive yellow and red flags came into effect, contributing to an increase in the cost of electricity for consumers. "More expensive energy also inhibits consumption, which directly affects the sector's activity," concluded Palis.