Pessimism spreads through the economy and the GDP ceiling shrinks.

247 - The 2016 parliamentary coup, which promised to boost the economy and resume growth, only succeeded in definitively destroying the prospects for future improvement. The expectation was that Brazil would grow by at least 3% this year, but six months into the year, projections indicate a paltry growth of only 1,5% – at best. Furthermore, high unemployment and falling consumer and business confidence have contributed to further undermining these projections. In May alone, industrial activity fell by 10,9%, partly due to the truckers' strike and partly due to Temer's economic policies.

According to analysts and economists from market-linked institutions, financial conditions point to an unfavorable future scenario. Future interest rates are high, the so-called "Brazil risk" is at a high level, the stock market shows a strong downward bias, and the real is undergoing significant depreciation, which helps explain the pessimism about the direction of the economy.

A report by Itaú Unibanco raises doubts about the ability of Michel Temer's government to carry out the economic policy of neoliberal fiscal reforms promised to the market. According to the bank, electoral uncertainty and an unfavorable external environment for emerging countries are factors contributing to the worsening economic scenario. 

One point that stands out: projections for 2019 are worsening significantly. Itaú Unibanco cut its estimate for next year from 2,5% to 2%. Note: at the beginning of the year, the bank's projections for 2019 pointed to growth of 3,7%. Bradesco also reduced its growth estimate for the next fiscal year from 3% to 2,5%.

Furthermore, the country registered approximately 13,2 million unemployed people up to the quarter ending in May. According to Goldman Sachs, the unemployment rate of 12,4% is similar to that recorded in the same period last year. And in this scenario, workers who manage to find some employment are doing so precariously, without formal contracts, or on their own. It is no wonder that the fear of unemployment is at a record high in the country.here). 

The disaster is significant in the industrial sector. Anfavea, the association of vehicle manufacturers, announced that production fell 20,2% in May compared to April. Cargo transportation declined 27,7%, the largest contraction in 19 years, according to highway concessionaires. According to data released last week by the Brazilian Institute of Geography and Statistics (IBGE), industrial production fell 10,9% throughout May.

At the same time, the fiscal debacle of the Temer government, which projects a deficit of around R$ 159 billion for this fiscal year, continues unabated. As the trend remains one of contraction, the new legacy of the coup for the country will be yet another period of recession in the near future.