Bank of America raised its forecast for Brazilian economy growth this year to 3.0%, citing positive surprises in recent data, the strength of exports, the resilience of the labor market, and the beginning of the monetary easing cycle, as well as the resumption of confidence in the face of reduced fiscal uncertainties.
“The sharp upward revision to its projection came after surprise first-quarter GDP growth and other stronger-than-expected activity data,” David Beker, head of economics for Brazil, and Natacha Perez, an economist at BofA, said in a report.
“This year’s growth review is driven by stronger net exports and less negative investment expectations,” Beker and Perez said.
Bank of America also highlighted that confidence levels have shown an improving trend in recent months, under the impact of the decrease in uncertainty related to fiscal and monetary policy conditions, and added that this should have a positive effect on next year’s growth.
“Looking ahead, as the monetary easing cycle progresses, the vote of confidence of the rating agencies with the improvement of Brazil’s credit score and the issuance of green bonds by the government are positive engines of investment growth in the medium term,” Beker and Perez added.
Last month, rating agencies Fitch and DBRS Morningstar raised their credit ratings for Brazil, while S&P upgraded the country’s outlook from “stable” to “positive.”
