Brazil’s Q2 GDP frustrates expectations, down -0.1 percent

Brazil's Q2 GDP frustrates expectations, down -0.1 percent
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Markets expected modest GDP growth of 0.2 percent in Q2 2021, but actual results were disappointing: according to official statistics institute IBGE, the Brazilian economy shrank 0.1 percent between April and June.

Despite being a positive outlier throughout 2020, the agribusiness sector led the way in losses this time around, falling 2.8 percent. Services, on the other hand, were up 0.7 percent, while family consumption remained at unchanged levels and investment dropped 3.6 percent.

As we showed in June, the effects of the second Covid-19 wave on activity levels in the Brazilian economy were less intense and shorter than the initial wave in 2020. Part of this can be put down to the economy’s improved ability to adapt to adverse situations and deal with pandemic restrictions. Another part concerns Brazilians’ widespread disregard for these regulations.

Over the past three weeks, markets have revised their GDP forecasts downward for the year. A month ago, markets expected the Brazilian economy to grow 5.3 percent, according to the Central Bank’s Focus Report (a survey with top-rated investment firms). However, in the latest edition of the report, analysts expected a GDP increase of 5.22 percent.

Economists believe the considerable improvement of vaccine rollouts will boost Q3 activity.