Itaú BBA - Signs of stabilization, but uncertainties remain

Brazil Scenario Review

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Signs of stabilization, but uncertainties remain

July 3, 2020

We kept our GDP growth estimates at -4.5% this year and 3.5% in 2021. Early signs indicate that economic activity may have bottomed in April.


For the version with all charts and tables, please open the attached pdf file

 

• While uncertainties linger, there are incipient signs that the spread of the virus is stabilizing. New cases/deaths will likely decline slowly, and the reopening of the economy is expected to be gradual and uneven across states. Regions where the outbreak was more intense early on are starting to ease social distancing measures and have not shown a new hike in cases so far, while regions with initially-milder surges were forced to reinstate distancing measures.

• We maintained our GDP growth estimates at -4.5% this year and 3.5% in 2021. Preliminary signs indicate that economic activity may have bottomed in April.

• We expect primary deficits of 11.0% of GDP in 2020 and 2.5% of GDP in 2021. Next year's deficit includes higher social spending, partially offset by tax hikes.

• We forecast the exchange rate at BRL 5.75/USD in 2020 and 4.50 in 2021. 

• We maintained our inflation estimates at 1.8% in 2020 and 2.8% in 2021. The inflation scenario remains benign and this year`s low reading will likely extend into next year.

• We kept our Selic rate expectations at 2.25% p.a. in 2020 and 3.0% in 2021.


 

For the version with all charts and tables, please open the attached pdf file



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