Brazil’s economic climate improves in Q2, boosted by vaccination – FGV

RIO DE JANEIRO, BRAZIL – Brazil’s Economic Climate Index (ECI), in the Latin America Survey, rose 9.9 to 82.2 points in the indicator’s performance in the second quarter, compared to the preceding result, related to the first quarter.

The performance was mainly driven by improved expectations, favored by the hope for a faster pace of vaccination in the country in the coming months, explained Lia Valls, economist at the Getulio Vargas Foundation (FGV), which conducts the survey.

In practice, the current pandemic scenario is still bad in Brazil, particularly with respect to the evolution of the Covid-19 pandemic, which started in March 2020.

When detailing Brazil’s performance in the ECI, the expert stated that, while the Expectations Index (EI) component rose from 137.5 to 182.4 points between the first and the second quarter, the same was not true for the Present Situation Index (PSI). The PSI dropped from 25 to 17.6 points in the same period.

The economist pointed out that, in the case of the PSI, several factors were considered in the experts’ answers about the Brazilian economic climate. In addition to the pandemic, the experts were also concerned about the rise in inflation in the second quarter.

However, she noted that the pandemic and the pace of vaccination were predominant in the result. “Vaccination [in Brazil] was slower than expected,” she acknowledged.

The market expectation is that immunization will occur at a faster pace in the next 6 months, which boosted the EI performance, she pointed out.

However, when asked about the future development of the ECI, in the third quarter result, the specialist was cautious. She stated that there is no way to say with certainty that Brazil’s ECI will rise, with the EI increasing. This is because rising expectations are not always confirmed in reality, and the course of the pandemic has so far been unpredictable, with new strains of the disease emerging.

“We have no way to predict the next ECI result [whether it will rise or fall] with the data we have so far,” she said.