Brazilian Macroeconomic Overview – May edition

FGV IBRE

Light at the end of the tunnel? Little by little, signs are appearing that the coronavirus pandemic is being controlled globally. There is no question that the total numbers of confirmed cases (almost 5 million) and deaths (approaching 350,000) are high. However, both have grown less than 2% a day for the past week, and these rates are continuing to fall. In the countries and locations where this process is more advanced, lockdown measures have been loosened and people have been moving around again, without news of any major spikes in cases. This has fueled a certain return of risk appetite. In some cases, such as Germany, the fall in GDP in the second quarter, although large, may be less horrendous than some people predicted.

In Brazil, the present moment is challenging. On the one hand, we are still in the acute phase of the pandemic, as the numbers of new daily cases and deaths have increased considerably throughout the month of May, and there are no concrete signs of a significant slowdown in the short term. As a result, the economic impacts have been severe. Since March, activity indicators have shown a more intense contraction of GDP in the first and second quarters than previously forecast. We have revised our projection of GDP decline in the first quarter, compared to the previous quarter, from 0.7% to 1.0%. For the second quarter, we have revised the projected decline from 5.7% to 9.6%. For the year, we have changed our forecast of GDP contraction from 3.4% to 5.4%.

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