As Covid-19 persists, Fitch Ratings lowers expectations for Brazil

Ratings agency Fitch Ratings has slashed its forecast for Brazil’s 2020 GDP growth rate by 1 percentage point, predicting a drop of 7 percent, “as the virus outbreak continues to intensify … despite aggressive policy easing.” Fitch also quotes record drops in industrial production in April and the projected 8.4 percent drop in consumers’ spending as reasons for the more pessimistic estimate.

Recovery is also set to be slower, as Fitch sees 3.5-percent GDP growth in 2021, followed by 2.5 percent in 2022.

The worsening of the estimates contrasts with the stabilization of global projections. The agency maintained its estimate for a 4.6-percent fall in global output due to the “clearer evidence in recent weeks of sequential improvements in economic activity.”

Fitch’s revision comes after local institutions worsened their GDP estimates once more in the Central Bank’s Focus Report, after an adjustment last week. Now, financial institutions see GDP shrinking by 6.54 percent — the 19th time in the last 20 weeks with expectations getting lower. Experts also predict that benchmark interest rate Selic will be slashed once more, ending the year at 2 percent.

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