Brazil Economic Forecast

Brazil Economic Outlook

March 17, 2020

The economy lost steam in sequential terms in Q4 2019. Fixed investment fell to an over three-year low, while consumer spending softened. Shifting to Q1, although growth prospects had looked optimistic at the start of the year, intensifying headwinds—mainly from the coronavirus outbreak—could have derailed momentum. The epidemic’s impact on the Chinese economy, commodity markets, and global financial conditions appears set to curtail Brazilian economic activity in H1, particularly in manufacturing, tourism, and trade. Moreover, the virus’ emergence in Brazil raises concerns that a full-on outbreak could cause the reform agenda to take a backseat. On 16 March, the government announced a USD 30 billion emergency bill to combat the fallout from the coronavirus. Measures include social assistance payouts, deferring corporate taxes and direct funds to mitigate the spread of the virus. That said, the government reaffirmed its commitment to its spending cap and noted that the package would be funded by cuts elsewhere in the budget.

Brazil Economic Growth

A more adverse global backdrop in H1 led many panelists to trim GDP forecasts for 2020 this month. Exports will likely remain hampered this year, while fiscal austerity will also drag on growth. That said, the economy is expected to strengthen, supported by low interest rates and the government’s reform agenda. Delayed reforms and a prolonged Covid-19 pandemic cloud the outlook. FocusEconomics analysts project growth of 1.9% in 2020, which is down 0.3 percentage points from last month’s estimate. In 2021, growth is seen accelerating to 2.4%.

Brazil Economy Data

2014 2015 2016 2017 2018
Population (million)202203205207208
GDP per capita (USD)12,1708,8278,7749,9739,040
GDP (USD bn)2,4551,7961,8002,0631,885
Economic Growth (GDP, annual variation in %)0.5-3.5-3.31.31.3
Domestic Demand (annual variation in %)0.3-6.3-4.81.51.9
Consumption (annual variation in %)2.3-3.2-3.82.02.1
Investment (annual variation in %)-4.2-13.9-12.1-2.63.9
Industrial Production (annual variation in %)-3.0-8.2-6.42.51.0
Retail Sales (annual variation in %)2.2-4.4-6.32.12.3
Unemployment Rate6.88.511.512.712.3
Fiscal Balance (% of GDP)-6.0-10.2-9.0-7.8-7.1
Public Debt (% of GDP)56.365.569.873.776.5
Money (annual variation in %)10.16.84.85.510.4
Inflation Rate (CPI, annual variation in %, eop)6.410.76.32.93.7
Inflation Rate (CPI, annual variation in %)6.39.08.73.43.7
Inflation (PPI, annual variation in %)2.211.37.7-2.58.8
Policy Interest Rate (%)11.7514.2513.757.006.50
Stock Market (annual variation in %)-2.9-13.338.926.915.0
Exchange Rate (vs USD)2.663.963.253.313.88
Exchange Rate (vs USD, aop)2.353.343.483.193.65
Current Account (% of GDP)-4.1-3.0-1.3-0.7-2.2
Current Account Balance (USD bn)-101.4-54.5-24.2-15.0-41.5
Trade Balance (USD billion)-4.019.547.667.058.0
Exports (USD billion)225191185218239
Imports (USD billion)229171138151181
Exports (annual variation in %)-7.0-15.1-3.017.59.9
Imports (annual variation in %)-4.4-25.2-19.89.620.2
International Reserves (USD)364356365374375
External Debt (% of GDP)14.418.618.115.417.0

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