Has the Economy Reached “Rock Bottom”?

BRAZIL ECONOMICS - Report 21 Jan 2016 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

Prompted by reports in the specialized economics/business press, some clients have asked us if there are any signs that the cycle of contracting GDP is nearing its end. We show here that this is not what is shown by the various confidence indicators from FGV, or our leading indicator of GDP.

The evaluation underpinning the revision of the projections made by the IMF in its latest World Economic Outlook coincides with our vision. The IMF highlights the relevant risks to global activity, which also translate into risks to the Brazilian economy. The recent dips in stock markets and commodity prices, associated with the increase in general risk perception stressed by the IMF, point to even steeper declines in GDP ahead. These events have not yet materialized, but the balance of risks does not suggest stabilization of activity, but instead a persistent and indeed even stronger contraction.

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