Brazil’s economy should recover pre-crisis level in 2024

Based on financial market projections in the Focus Bulletin of the Brazilian Central Bank (BC), Austin Rating’s chief economist, Alex Agostini, calculates that Brazil’s economy should recover to the pre-crisis level in 2024.

The country has undergone two recessions in the last nine years: the 2015-2016 crisis and the covid-19 pandemic.

Before that, the peak of the Central Bank’s IBC-Br (Index of Economic Activity) was recorded in December 2013, with 148.7 points. The indicator is considered the GDP (Gross Domestic Product) preview.

Brazil has not managed since 2013 to recover the level of historical maximum. The last index, in July 2022, was 145.5 points.

According to the market scenario, the country will grow 2.65% in 2022, 0.5% in 2023, 1.7% in 2024 and 2% in 2025. The percentages were released on Monday, September 19.

To estimate the period of resumption of the 2013 level, economist Alex Agostini calculated the annualized impact of growth projections in the IBC-Br.

The penultimate survey made by the analyst in February 2022 showed that Brazil would only recover in August 2026.

The 21-month difference between the two projections is due to the improvement in the financial market’s projections in the Focus Bulletin.

At that time, the market was betting on growth of 0.3% in 2022, 1.53% in 2023, and 2% in 2024.

Due to the expectation of a better GDP this year and next, the recovery from the pre-crisis level should be earlier than expected.

RECOVERY BEFORE 2024

The recovery from the 2013 level may be before 2024. Analysts still diverge on growth projections for this year.

The federal government believes the country will grow by 2.7% in 2022. Bank of America has already said that the rise will be 3.25%.

The trend is upward in market estimates. They have already raised the expected GDP for the 12th consecutive week.

Analysts have underestimated the performance of the Brazilian economy in recent reports.

The 2nd quarter GDP surprised, and Brazil had the seventh-highest quarterly increase worldwide from April to June.

Alex Agostini calculated four other scenarios to identify when Brazil will resume the economic activity level of 2013.

• 1% annual growth;
• 2% annual growth;
• annual growth of 2.5%;
• annual growth of 3%.

The pre-crisis level is reached next year in three of the four scenarios. If Brazil grows 3% per year, it will be beaten in April 2023.

If it grows 2% per year, the 2013 IBC-Br score will be reached in September next year.

According to the economist, annual growth of 1% should make Brazil recover to the pre-crisis level in October 2024.

IBC-BR

The Central Bank’s IBC-Br is published monthly. From January to July, Brazil grew 2.09%.

With the economic result so far in 2022, even if Brazil stagnates in the year’s final months, it will already have a contracted growth above 2%.

But the stagnation scenario is not what is expected.

The chances of Brazil regaining the pre-crisis level as early as 2023 are high, after ten years below this level.

Everything will depend on how the rise in interest rates will pressure the economy in the second semester and the scenario of uncertainties concerning economic policies from 2023.

With information from Poder360