SWISSCAM received on December 04, 2019, Felipe Tâmega Fernandes, Head of Research and Analytics of Itaú Asset Management, to share with our associates the economic prospects for 2020.
The economist was emphatic in saying that Brazil is at the beginning of a cyclical recovery, but internal and external factors will be decisive for the results. In 2020, Itaú Asset Management estimates that Brazilian GDP will grow 2.7% and the general market expects growth of 2.2%. “This expectation seems very optimistic, but it does not represent a big growth in reality. If it is confirmed, Brazil will grow around 0.6% every quarter. ”
The main factors that indicate growth are low interest rates, credit growth, increased consumption, increased tax expenditures and falling unemployment. “Interest rates should remain low at around 4.5% next year, thereby increasing consumption and credit. In addition, with the approval of the Labor Reform, the labor market is expected to become more flexible, allowing more people to work on hours-based contracts. We also expect government fiscal expansion. ”
Also according to the economist, the Brazilian economy should grow at the same pace as the global economy in the coming years. The IMF forecasts global growth of 3.6 percent by 2020 and 3.5 percent by 2021.
Felipe Tâmega stressed the importance of accelerating the economy in the short term, given the national political risks. “Economic growth is very important to the government right now and it needs to be tangible to the population as soon as possible. If the domestic political risk increases, it could derail growth, as the fiscal agenda will be in check. We must also be aware of the municipal elections that will take place in 2020. ”
Regarding international factors, the economist said that external vulnerability today is not a big problem, because the balance of payments and reserves are adequate. However, other events such as Brexit, the US elections and the China-US trade war may affect Brazil. “However, political instability and the economic slowdown in Latin America is a matter of concern because of the wave of protests. Chile and, perhaps, Colombia are the countries that worry the most. We should also keep an eye on Mexico’s slowly deteriorating institutions. ”
We greatly appreciate the participation and commitment of economist Felipe Tâmega. We are also grateful to our Financial and Economic Committee Coordinator, Frederico Turolla. Our members left the event better prepared to plan their business next year.