RIO DE JANEIRO, BRAZIL – The 1.5 percent drop in GDP recorded in Q1 is by no means indicative of the impact of the covid-19 pandemic on the Brazilian economy, according to banks and consulting firms. Analysts’ projections point to the Brazilian economy tumbling by over ten percent over the next quarter.
Itaú Unibanco estimates that the drop will be 10.6 percent in the next quarter this year. In turn, Santander projects a contraction of 13.5 percent over the same period. XP Investments estimates that the Q2 drop will be 13.7 percent.
American investment bank Goldman Sachs is also pessimistic in its assessment. According to the bank, economic activity is expected to decrease by 12.9 percent in Q2.
“Currently, Brazil is one of the epicenters of covid-19 cases, tests have been comparatively low and mobility data show that compliance with local government social isolation regulations is below what the authorities would desire. In addition, the federal government and local authorities continue to differ on the scope and extent of measures to address the public health crisis. At this stage, it is unclear when the viral curve will peak,” wrote Alberto Ramos, Goldman’s chief economist for Latin America.
Luka Barbosa, an economist with Itaú Unibanco, says preliminary data point to hitting rock-bottom in April and an improvement in indicators in May and June: “As the isolation measures have decreased, the economy should show evidence of a rebound. There are uncertainties over the speed of capacity, but we see a turnaround over the second half of the year.
For Luís Otávio Leal, chief economist of Banco ABC Brasil, the data released on Friday are a “snapshot of the past”. He points out that 15 days in a sample of 90 were enough for domestic GDP indicators, such as household consumption and the service sector, to show their worst result in decades.
ABC Brazil’s estimate is for a 12 percent drop in Q2. Data from the Central Bank’s Focus Bulletin show that the GDP will contract by 13.5 percent between April and August.
“We have seen in China a faster rebound in the industrial sector while slower in the service sector. In a country like Brazil, where the service sector is much more significant than the industrial sector, this will be very bad,” he explains.
The Asian and European economies, where the impact of the pandemic on the economy occurred in the first few months of this year, showed sharper declines in Q1 than Brazil.
China, the country where the disease emerged, recorded a 6.8 percent decline in the first three months of this year, the first negative result since 1992. Europe was also heavily impacted in Q1 2020.
In France, economic activity dropped by 5.8 percent, the largest slump since 1949, when the country’s GDP began to be recorded. In Spain, the drop was 5.2 percent, the highest since the Spanish Civil War (1936-1939).
Source: O Globo