Brazil Economic Forecast

Brazil Economic Outlook

May 19, 2020

The panorama has further darkened at the outset of the second quarter, after the coronavirus first hit the economy in the first quarter. Industrial output fell at the sharpest rate in nearly two years in March, while retail sales dropped at the fastest pace in over four years in the same month, reflecting the impact of social distancing measures. Turning to Q2, the manufacturing PMI fell to a record low in April as factory closures and weaker demand battered production and new orders. Meanwhile, on 6 May, the lower house of Congress passed the “war budget”, unlocking an estimated BRL 600-800 billion for recovery measures, while also giving the Central Bank permission to undertake quantitative easing to shore up the economy. Moreover, the Senate approved a BRL 60 billion aid package to help the states; however, the bill is pending President Bolsonaro’s final approval. Meanwhile, against the current backdrop, Fitch Ratings revised Brazil’s BB- credit rating outlook to “negative” from “stable”.

Brazil Economic Growth

GDP is expected to fall this year as the Covid-19 pandemic deals a heavy blow to the economy. Containment measures are seen hammering private consumption and investment, while feeble global demand will cripple exports. Although fiscal and monetary stimulus should provide a cushion, the extent of the shock and political tensions further cloud the outlook. FocusEconomics analysts project the economy will contract 4.8% in 2020, which is down 1.6 percentage points from last month’s estimate, before growing 3.3% in 2021.

Brazil Economy Data

2015 2016 2017 2018 2019
Population (million)203205207208210
GDP per capita (USD)8,8278,7749,9739,040-  
GDP (USD bn)1,7961,8002,0631,885-  
Economic Growth (GDP, annual variation in %)-3.5-3.31.31.3-  
Domestic Demand (annual variation in %)-6.3-4.81.51.9-  
Consumption (annual variation in %)-3.2-3.82.02.1-  
Investment (annual variation in %)-13.9-12.1-2.63.9-  
Industrial Production (annual variation in %)-8.2-6.42.51.0-1.1
Retail Sales (annual variation in %)-4.4-6.32.12.31.9
Unemployment Rate8.511.512.712.311.9
Fiscal Balance (% of GDP)-10.2-9.0-7.8-7.1-5.9
Public Debt (% of GDP)65.569.873.776.575.8
Money (annual variation in %)6.84.85.510.48.5
Inflation Rate (CPI, annual variation in %, eop)10.76.32.93.74.3
Inflation Rate (CPI, annual variation in %)9.08.73.43.73.7
Inflation (PPI, annual variation in %)11.37.7-2.58.89.6
Policy Interest Rate (%)14.2513.757.006.504.50
Stock Market (annual variation in %)-13.338.926.915.031.6
Exchange Rate (vs USD)3.963.253.313.884.02
Exchange Rate (vs USD, aop)3.343.483.193.653.95
Current Account (% of GDP)-3.0-1.3-0.7-2.2-  
Current Account Balance (USD bn)-54.5-24.2-15.0-41.5-49.5
Trade Balance (USD billion)19.547.667.058.048.0
Exports (USD billion)191185218239225
Imports (USD billion)171138151181177
Exports (annual variation in %)-15.1-3.017.59.9-5.8
Imports (annual variation in %)-25.2-19.89.620.2-2.1
International Reserves (USD)356365374375357
External Debt (% of GDP)18.618.115.417.0-  

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Value Change Date
Bond Yield6.79-0.82 %Dec 31
Exchange Rate4.02-0.13 %Jan 01

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