Update On Brazil November 2018

Right-wing Jair Bolsonaro was elected president on 28 October, after a polarizing and turbulent election cycle. Bolsonaro campaigned on a largely market-friendly platform, vowing to continue with economic reforms and curb the worrysome fiscal deficit, which should bode well for the economy going forward if enacted. That said, Bolsonaro is a controversial and wildcard figure; he could thus have difficultly drumming up support in Congress to pass legislation throughout his tenure, while some uncertainty remains regarding his incoming policies. Meanwhile, mixed economic data is rolling in on the recovery. The unemployment rate fell in the third quarter and consumer confidence jumped in October, positive signs for household spending. However, industrial production contracted sharply in September and business confidence fell further the following month. Overall, growth is expected to have firmed in Q3 as the economy normalized after the truckers’ strike caused widespread disruptions in Q2.

After downgrading Brazil’s outlook last month, FocusEconomics panelists kept their view of 2019 growth unchanged this edition. Next year, the recovery should gain steam on the back of an improving labor market and robust fixed investment. Keeping the country’s finances on a positive trajectory is key to the country’s longer-term outlook and Bolsonaro’s pledges to pursue fiscal consolidation should keep growth on track. GDP is seen growing 2.3% in 2019 and expanding 2.5% in 2020.

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