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Bloomberg
Analysts from Goldman Sachs Group Inc and Bank of America Corp (BofA) see Brazil’s economy growing faster this year after a better-than-expected first quarter that was driven by investment and booming agriculture.
Goldman increased its growth forecast for Latin America’s largest economy to 5.5% from 4.6%, while BofA raised its projections to 5.2% from 3.4%.
“Concerns about the slowdown in first quarter activity were exaggerated,†David Beker, BofA’s Chief Brazil economist, said in an interview. “We expect the economy to recover visibly in coming quarters,†Goldman’s Alberto Ramos wrote in a note.
Brazil’s gross domestic product increased 1.2% in the first quarter from the previous three-month period, more than the 0.9% median estimate from analysts in a Bloomberg survey. From a year prior, the economy grew 1.0%, the statistics agency reported.
The recovery took place even if challenged by fresh restrictions on commerce and movement meant to help combat new, more contagious variants of the virus. Cash handouts for the most vulnerable Brazilians, the centerpiece of President Jair Bolsonaro’s stimulus package, were also paused during the quarter. Still, recent indicators such as retail and industrial output have topped forecasts.
Swap rates on the contract due in January 2022, which indicate investor expectations for monetary policy, rise 5 basis points to 5.11% in the trading. The real strengthened 1.1% to 5.1603 per dollar, the best performance by a major currency.
Policy makers and private sector analysts are becoming increasingly confident that growth can surpass 4% this year. Economy Minister Paulo Guedes echoed private estimates, saying the release signalled strong expansion for the rest of the year.
But those hopes are largely pinned on bets immunisation campaigns will gain momentum in the second half, even as the government struggles in sourcing shots and inputs.
The central bank also began increasing its interest rate in March as higher commodity costs and lagged effects from government spending fuelled consumer prices. Annual inflation stood at 7.3% in mid-May, above bank’s 2021 target of 3.75%.
The recovery is likely to continue gaining momentum despite the worsening of the pandemic late in the quarter, with factors including fiscal and monetary support helping growth, according to Andres Abadia, an economist at Pantheon Macroeconomics.
“The outlook in the near term is benign,†he wrote in a research note.