Economy

Commodities that are “saving” Brazil’s economy could run out within two years

May, 18, 2021 Posted by Ruth Hollard

Week 202122

The combination of high commodity prices, a devalued exchange rate, and the expansion of world trade will sustain economic activity in Brazil this year, offsetting part of the adverse effects of the pandemic and political and fiscal uncertainties.

“We see an increase in net exports, which induces a slightly stronger economic recovery in Brazil,” says former Central Bank president Affonso Celso Pastore. “We will see a revision in the growth forecasts of economists in the financial market, from the range of 3% – 3.2% to percentages such as 3.4%, 3.6%, 3.8%.”

Pastore’s consulting firm, A. C. Pastore & Associados, released a report on Monday, increasing its estimate for Brazil’s 2021 gross domestic product (GDP) from 3.2% to 4%. Other firms are also forecasting percentages of 4% or more.

“For now, we don’t see a super cycle, but commodities can remain strong for 12 or 18 months, not several years,” says Mario Mesquita, former BC director and chief economist at Itaú Unibanco. “That said, the global context is positive for the Brazilian real. And, here, the activity has an upward bias. We recently pulled the GDP projection to 4%, and we may have to revise it up again.”

The less intense fall in the economy during the second Covid-19 wave and the faster reopening of the economy have both helped increase projections for the economy. XP Investimentos began to project a 4.1% increase; Bradesco Asset Management (BRAM) is projecting 4.3%; and ASA Investimentos projects 4.5%.

Nobody is suggesting exuberant growth. Statistical factors are inflating these high numbers, technically known as loading. An increase of 3.6% means that the activity has just paused. Brazil is expected to expand more slowly than the rest of the world, whose growth is estimated by the International Monetary Fund (IMF) at 6%. Even so, the external engine is helping Brazil more.

Source: Valor Econômico

 

To read the full original article, access the link below:

https://valor.globo.com/brasil/noticia/2021/05/18/commodities-salvam-a-economia-do-pais-este-ano.ghtml

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