Covid-19 erases market expectations for Brazil

It took some weeks, but the Central Bank’s Focus Report — a weekly survey among top-rated investment firms — has finally reflected the overall pessimistic mood about the world economy and Latin America, in particular. Last Monday, the median GDP growth projection by market analysts remained at +1.48 percent. Today, it has tumbled to -0.48 percent.

Market projections have been slashed consistently since early in February, when signs of a Chinese slowdown sent jitters around global markets. At that point, however, the coronavirus was mainly a Chinese problem. Now that the virus has spread around the globe, recession is inescapable. Almost every projection sees an explosion of unemployment rates and bankruptcies — brokerage firm XP thinks 40 million could be out of a job by the end of the Covid-19 crisis, which might turn today’s -0.48 percent GDP dip into an overly optimistic projection. A few weeks ago, Goldman Sachs cut its GDP prediction for Brazil by 3.1 percentage points, to -0.9 percent. 

Other markets will feel the blow, too. Germany’s panel of economic advisers to the government says a European recession is inevitable. In a worst-case scenario, output will shrink by 5.4 percent. In Japan, contraction may reach 7.1 percent.Speaking to our Explaining Brazil podcast, Filipe Campante, associate professor at the Johns Hopkins University School of Advanced International Studies, says the question is no longer whether we are set for negative results in the future, but “how bad things will get.”

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