In its latest round of GDP projections, the Organization for Economic Cooperation and Development (OECD) now expects Brazil’s GDP to contract by as much as 9.1 percent in case a second Covid-19 wave hits the country by the end of the year. Even if that doesn’t materialize, the country’s economy is expected to plunge by a staggering 7.4 percent.
“Emerging economies such as Brazil, Russia, and South Africa face particular challenges of strained health systems, adding to the difficulties caused by a collapse in commodity prices,” said the OECD.
While Brazilian prospects are worse than the 6-percent global recession projected for 2020 — or a 7.6-percent drop in a second wave scenario — they are not as grim as those of some developed economies. Economic activity in the Eurozone is set to drop 9.1 percent this year, extending the slide to 11.5 percent in the worst case scenario; for the U.S., projections are 7.3 and 8.5 percent, respectively. Considering the perspectives, the OECD believes that “government support to help people and businesses in hard-hit sectors will need to evolve and remain substantial.”
OECD data sheds light on what is being considered the main risk for financial markets around the world. Optimism with the reopening of developed countries without signs of a second wave has sustained market recoveries — which spurred a 52-percent gain for Ibovespa, Brazil’s benchmark stock index, from its lowest point, reached on March 23, as we showed in our June 10 Daily Briefing.
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