Swiss bank projects a 10% drop in Brazil's GDP in 2020.
UBS economists highlight the risk of the pandemic leading Brazil to high levels of political uncertainty, with negative impacts on investor confidence. According to the bank, in scenario one, the economy falls by 5,5%; in scenario two, by 7,2%; and in the worst of the three, GDP shrinks by 10,1%.
Reuters - UBS has cut its estimate for the contraction of the Brazilian economy in 2020 to 5,5%, after predicting a 2% drop earlier in the month, but depending on the scenario analyzed, the fall could be even greater, at 10,1%.
In scenario one, the economy falls by 5,5%. In scenario two, by 7,2%. And in scenario three, it suffers a double-digit decline.
In scenario one, existing social distancing restrictions remain in place until mid-May, with activities largely returning to normal by the end of June.
In both cases, restrictions will only begin to be lifted by the end of June, with normalization expected by the end of August.
In the third scenario, the coronavirus pandemic is not effectively controlled until mid-2021, and as a result, restrictions are only partially lifted.
But economists Tony Volpon and Fabio Ramos, who authored Tuesday's report, cautioned that even outside of scenario three, the economy could suffer a sharper decline than anticipated, affected by political issues.
Professionals highlight the risk of the pandemic leading to high levels of political uncertainty, with negative impacts on investor confidence, which could generate a permanently higher risk premium in asset prices.
In this case, "we could see an outcome similar to scenario three even if the pandemic is under control," Volpon and Ramos said.
In 2021, UBS sees the economy expanding by 6,5% (scenario one), 8,3% (scenario two), and 5,4% (scenario three).