Economists Expect Stronger Growth, Don’t See Recession Coming Here By

By Jessica Bahia Melo and Ana Beatriz Bartolo – While the North American economy assesses the risks of a recession – which, consequently, would impact global markets -, in Brazil, the expectation is for growth. There, there was a contraction of 1.5% in the first quarter compared to the previous in its second estimate. Here, if initially forecasts were of a weak performance, analysts have revised their estimates and now expect a more intense increase in economic activity.

The Brazilian Institute of Geography and Statistics (IBGE) releases this Thursday (2) the GDP results for the first quarter. In the annual comparison, the average of the analyzes compiled by is a growth of 1.8% over a year earlier (this pace was 1.6% in 4Q21). And the estimate for the first quarter compared to the previous one is a growth of 1.2% (compared to 0.5% in 4Q21 compared to 3Q21).

XP (SA:) report points out that after a relatively weak start to the year, the current estimate is for an increase of 1.4% compared to the 4th quarter of 2021, well above the initial projections of around 0.5%. “Not due to the strong expansion of the agricultural sector and the expressive positive variation in inventories, but in the wake of the economic reopening, the solid recovery of employment, the increase in household disposable income and the jump in commodity prices (it boosts many exporting sectors and generates “income spillover” effects on other local activities)”, details the document.

UBS is another house that raised its estimate for GDP in 1Q22, from 0.5% initially to 1% today. The bank highlights difficulties with obtaining data this year, which has been hampering analysts’ estimates.

Banco ABC Brasil (SA:) expects a GDP of 0.7% in the 1Q, considering the sectorial indexes of retail and services already published by the IBGE, in addition to industrial production and the estimate for the domestic grain harvest.

Eduarda Korzenowski, economist at Somma Investimentos, now believes that first-quarter GDP could grow by more than 1.0%, well above initial expectations of 0.7% growth. “In fact, the data for the first quarter surprised positively, mainly due to the better-than-expected recovery in the service sector and the measures to stimulate economic activity launched by the government,” she says.

Paulo Gala, economist at Banco Master, estimates a growth range of 0.5% to 1% in relation to the 4Q. “It is important to remember that many people expected a drop in GDP in the first quarter of this year. In the US economy, GDP has fallen. So, the data we’ve already seen from retail, services and industry is a positive surprise, showing that Brazil’s performance was much better than imagined”, he details. The data should be driven by mining commodities, , and some agro areas, according to Gala.

Banco Original estimates that the advance should be 1.5% compared to the previous quarter, “influenced by the rise in the services segment (which also includes commerce), with emphasis on cargo transport services and other services. , which accompanies the resumption of mobility”, adds economist Marco Caruso.

Can global recession contaminate Brazil?

The World Bank has been issuing warnings about the risks of a global recession. According to the institution’s president, David Malpass, Russia’s war in Ukraine and the impact on commodities and fertilizers could trigger a global recession. The fear of a recession doesn’t seem to end here. UBS, for example, forecasts GDP growth of 1.1% for the year. According to the bank, there is a large and unexpected imbalance between tradable and non-tradable goods due to high inflation, which would be affecting retail and industrial products more than services. Also, bottlenecks in global supply, such as interruptions in Chinese production and the mobility of the Asian country, with the zero covid policy, affect Brazil, which has an economic correlation with the giant.

The Somma economist does not believe in a recession this year for Brazilian economic activity, as the first and second quarters should be very positive, according to her. “In the second half of the year, we expect a greater deceleration of activity, due to the lagged effects of the monetary policy, which is already at a contractionary level. For 2023, we see a scenario of lower activity, with interest rates still contracting here and abroad, but we also do not contemplate a recessive scenario”, she reinforces.

Banco ABC Brasil projects an increase of 1.2% in economic activity for the year, reflecting the positive performance of sectors linked to commodities and exports. XP revised its 2022 GDP growth forecast from 0.8% to 1.6%. And UBS pointed out in a report that, despite a potentially better first quarter, the risk of an abrupt short-term contraction leads analysts to estimate an average Brazilian GDP growth at 1.1% in 2022. 3Q, the estimate could be 1.5% to 1.6%, according to the document.