Brazil’s next GDP report will come strong. But it’s not time for a victory lap

Over the past three years, Brazil watchers got used to listening to Economy Minister Paulo Guedes’ unbridled optimism about the economy. “We’ll surprise the world,” “Brazil is sentenced to grow,” and “we’re ready to take off” were expressions repeated in press conferences and public events to the point of turning into catchphrases and WhatsApp stickers. Mr. Guedes will probably have some reason to laugh when the official Q1 GDP report is out, on June 1.

According to the Brazilian Institute of Economics (Ibre-FGV) at think tank Fundação Getulio Vargas (one of the most reliable economic number-crunchers in the country), Brazil is set to post 1.5-percent quarter-on-quarter growth, or 6.1 percent in annualized terms, in that period.

The indicators for the period released so far are already leading major forecasters to revise their full-year forecasts from close to zero in January to something closer to 2 percent. 

Indeed, if Ibre’s projection is confirmed, headline 2022 growth will be 1.8 percent even if quarterly GDP stays flat during the remaining three quarters of 2022 (this is the so-called “statistical carryover” economists like to mention).

Part of the upward surprise comes simply from an exaggerated pessimism at the turn of the year, probably triggered by extrapolating the pretty negative Q3 2021 report – the latest known data when economists released their traditional outlook reports.

Since then, I have been arguing that growth would probably...