SAO PAULO – After a result above expectations in the first quarter, when the Gross Domestic Product (GDP) rose 1.2%, economists expect the performance data for the Brazilian economy to come more modest for the period from April to June this year. The numbers will be released this Wednesday (1), at 9 am (GMT), by the Brazilian Institute of Geography and Statistics (IBGE).
The expectation of economists consulted by consensus Refinitive is a 0.2% increase in Brazilian economic activity compared to the first quarter, albeit with an increase of 12.8% in the annual comparison basis, amid the low base when compared to the peak of the impact of the restrictive measures on account of the coronavirus pandemic. There are, however, those who see a better performance and, even more pessimistic economists with the data to be released this morning.
In recent weeks, amid increased political and fiscal risks, as well as strong inflationary pressure, the financial market has reduced growth projections for the Brazilian economy. According to the most recent Focus report, by the Central Bank, GDP should expand by 5.22% in 2021 – in the third consecutive downward revision.
XP, for example, expects a modest 0.3% GDP growth in the second quarter, on a quarterly basis, and 13% year-over-year. “If our estimate is correct, the statistical carry-over effect for GDP growth in 2021 will be 5.2%. In addition, the Brazilian GDP would be 0.3% above the level registered before the pandemic (fourth quarter of 2019)”, writes Rodolfo Margato, economist at XP, in a report.
Margato believes that the recovery of the service sector, driven by the relaxation of social isolation measures amidst the pandemic, more than offset the weak performance of industry and agriculture in the period. This is because the shortfalls in the coffee crops (the main downward contribution in the period), sugarcane and corn came above the expansion of the soybean crop.
On the demand side, the XP economist expects favorable results in all components, given the expansion of 1.2% in household consumption compared to the previous quarter, as well as the growth in Government consumption, reflecting the partial normalization provision of public services, such as health and education.
Optimistic about the consistent growth of the Brazilian economy in the second half of the year, XP expects an expansion of 5.5% of GDP this year.
For the next year, the house attributes a downward bias, expanding 2.3% of GDP, mainly due to the significant deterioration of financial conditions in recent weeks.
Safra’s forecast for GDP for the second quarter of 2021 is similar, with an increase of 0.3% compared to the previous quarter. The interannual variation should be 12.3%, according to the bank.
In line with the average projections of the Refinitive, Credit Suisse expects a 0.2% growth in Brazilian GDP on a quarterly basis. In the annual comparison, the expectation is an acceleration of 12.8%. According to Credit, the strong increase in annual terms would be driven by the low base of comparison due to the pandemic in 2020.
On the supply side, the bank expects strong quarterly growth in services in the second quarter, due to the reopening of the economy between May and June. On the other hand, from the perspective of demand, the team expects a resumption of consumption by families and the government. According to Credit, there should be widespread growth across all categories year-on-year.
“Over the next few quarters, we expect economic recovery to continue, with average GDP growth of 0.5% in the second half of 2021,” writes Credit Suisse.
Finally, Bradesco expects GDP growth of 0.1% in the second quarter compared to the first three months of 2021. Expectations point to an expansion of 5.2% of the economy in 2021 and 2.2% in 2022 .
There are those who are less optimistic
With a more negative view than that adopted by other houses, Morgan Stanley estimates a contraction of 0.1% of GDP in the quarterly comparison.
The bank sees a contraction in investment (a 4.9% drop on a quarterly basis), dragged down by a payback from stocks after the positive surprise registered in the first three months of the year.
“Coincident indicators for Q2 GDP also point to a strong impression despite the peak of mobility restrictions in April. In addition, the emergency collection that resumed in mid-April should support the recovery of private consumption”, write the economists.
Looking ahead, Morgan sees economic reopening contributing to further growth in the second half of this year, supported by fewer coronavirus cases and deaths.
“As schools reopen and consumers feel safer to return to entertainment venues and malls, we expect a non-linear improvement in labor market numbers, where recovery has been slower in Brazil,” writes Morgan Stanley .
Main risks on the horizon
Among the main risks on the horizon, which should be on the market’s radar, XP highlights the persistence of inflationary pressure, which may imply a smaller mass of real income available to families and a tighter monetary policy.
The current water crisis and the growing probability of some type of electricity rationing in the coming quarters should also be closely monitored. Also worthy of attention is the dissemination of the delta variant of the coronavirus and, with it, a possible more accentuated slowdown in the global economy.
To understand how to trade the stock market through technical analysis, sign up for the free course A Hora da Ação, with André Moraes.