Brazil Economic Activity Returned to Pre-Covid Levels, BofA Says
While Brazilian authorities are struggling to tame the spread of the coronavirus, they may be succeeding in revitalising economy.
(Bloomberg) -- While Brazilian authorities are still struggling to tame the spread of the coronavirus, they may be succeeding in revitalizing the economy.
Bank of America‘s internal data indicates there was a strong rebound in Brazil’s economic activity last month, according to a research report by analysts Ana Madeira and David Beker sent to clients on Monday. The bounce was so significant that BofA says growth as measured by the central bank’s economic activity index, or IBC-Br, may have returned to pre-Covid levels as social isolation measures wane and mobility indicators continue to rise.
With over 3.6 million registered cases and nearly 115,000 deaths, Brazil trails only the U.S. with the world’s second most severe coronavirus outbreak. Yet the outlook for its economy is less grim than many of its regional peers, thanks to aggressive fiscal and monetary policies and lax quarantine measures.
Given the rebound, Maderia and Beker say this year’s economic contraction could be less painful. BofA data now suggests Brazil’s gross domestic product may shrink -5.2%, versus its current forecast of -5.7%.
The economists caution, however, the recovery looks less certain over the longterm as stimulus dollars run out. “The likely rapid rise in unemployment ahead and significant challenges on complying with fiscal rules may hinder a sustainable growth for the medium term in our view,” Maderia and Beker wrote.
©2020 Bloomberg L.P.