June 19, 2021

The market expects a 3.34% retraction in Brazilian GDP in 2020

The financial market once again lowered the forecast for Brazil’s Gross Domestic Product (GDP) and now projects a 3.34% collapse in the largest economy in South America in 2020, as reported by the Central Bank on Monday.

This is the lowest projection the market makes for the Brazilian economy this year, since the expectation of retraction went from 2.96% last week to 3.34% this Monday, according to the latest edition of the Focus bulletin, which compiles the opinion of more than a hundred financial institutions and is released weekly by the country’s Central Bank.

This is the eleventh time in a row that the market has revised the indicator downward, thus confirming the harsh effects that the coronavirus pandemic should have on the Brazilian economy, which has been experiencing a slow recovery for three years, after the crisis experienced in 2015 and 2016 when the GDP fell 7%.

In addition to the new review for 2020, the financial market reduced the economic growth projection from 3.10% a week ago to 3.0% by 2021, while maintaining the estimate of a 2.50% advance in 2022.

Analysts’ expectations for the contraction of Brazilian GDP this year are below the projection disclosed by the World Bank, which foresees a retraction of 5%, and the International Monetary Fund (IMF), which calculates a fall of one 5.3%.

On the other hand, although most global financial institutions point to a harsh recession this year, the Brazilian government projects a negligible growth of 0.02%, while the Central Bank estimates a complete stagnation (0%) for the largest economy. South American.

After the economic crisis of 2015 and 2016, Brazil was confident that it would have a more robust recovery this year, after the discreet growth recorded in the previous three years (1.3% in 2017, 1.3% in 2018 and 1.1 % in 2019).

However, the global health and economic emergency caused by the coronavirus has frustrated optimism regarding a recovery in the country and the first effects of the pandemic have already been felt both in the São Paulo stock exchange and in the exchange market.

While the Brazilian market has sunk close to 35% so far this year, the US dollar continues to rise exponentially in the country and already accumulates an appreciation of more than 40% against the Brazilian real in 2020.


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