Brazil Recovery Optimism Rises Despite Covid and Inflation

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Brazilian analysts and policy makers are striking a more optimistic tone on the nation’s recovery, even as the government struggles to contain faster inflation and one of the world’s worst coronavirus outbreaks.

On Monday, analysts raised their forecasts for economic growth and the benchmark interest rate for this year. Gross domestic product will expand 3.96%, up from the prior estimate of 3.52%, according to a central bank survey. The Selic will hit 5.75% at the end of 2021, up from the prior forecast of 5.5%.

Brazil Recovery Optimism Rises Despite Covid and Inflation

The revision marked the sixth straight week analysts raised their growth projection for 2021. Economy Minister Paulo Guedes told investors later in the day that expansion will likely surpass 4% and that the primary budget deficit is being revised to less than 3% of GDP.

“Brazil is on a surprising growth path,” he said at an online event. “Tax revenue is breaking records month by month.”

Optimism about Latin America’s largest economy is rising even as the government struggles to source Covid vaccinations. At the same time, policy makers have pledged to remove part of their monetary stimulus as inflation blows past target. This month, the central bank raised borrowing costs for a second straight meeting, to 3.5%, and pledged another 75-basis point hike in June.

BRAZIL PREVIEW: 1Q GDP to Bring Many Answers to Growth Puzzle

The national statistics institute will release the official first quarter GDP figures on Tuesday.

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