JP Morgan bank is already projecting a 10% drop in Brazil's GDP in the second quarter of this year.
The scenario is no longer one of recession, but rather of economic depression.
SAO PAULO (Reuters) - JPMorgan and Goldman Sachs have revised their forecasts for the Brazilian economy upwards this year, with GDP affected by the global effects of the coronavirus, joining other financial institutions that have also worsened their outlook for economic activity.
The most conservative forecaster is JPMorgan, which projects a 1,0% decline in GDP in 2020 (compared to a previous expectation of 1,6% growth), with a "deep recession" in the first half of the year.
The bank expects a 3,5% contraction in the economy in the first quarter of this year compared to the previous three months (seasonally adjusted), mainly due to the blow to global GDP and fears of Covid-19 in the country.
In the second quarter, JPMorgan already projects a 10% drop, as the downside effects of the spread of the coronavirus and measures to contain the outbreak, along with tightening financial conditions and a global recession, will play a "crucial role".
"We believe the second quarter could be even worse, but the fiscal measures announced by authorities should soften the effects," the bank said in a report.
Goldman Sachs also cut its 2020 economic forecast, from 1,5% growth to a 0,9% contraction.
“The combination of declining external demand for goods and services, worsening terms of trade, a significant tightening of domestic financial conditions, and the economic impact of rapidly escalating measures to deal with the Covid-19 outbreak within national borders, have led us to further revise downwards our outlook for Latin American economies,” Goldman also said in a report.
On Wednesday, UBS lowered its growth forecast for Brazilian GDP this year to 0,5%, after previously revising it downwards from 1,3% (down from 2,1%).
The day before, Credit Suisse had reduced its growth forecast from 1,4% to zero, and Santander Brasil also lowered its estimates.
In a report released this Wednesday, Bradesco said that the impacts of the pandemic on the economy "will be inevitable," with simulations for global GDP placing the Brazilian economy at a growth rate "much lower than the 2,0% expansion we projected."
“But there are also important mitigating factors in Brazil. The country has international reserves of around US$380 billion, which have even appreciated during this crisis with the flattening of the US yield curve,” the bank said.