Economy

Morgan Stanley's analysts estimate that Brazilian GDP will return to pre-pandemic levels in Q3 2021

Morgan Stanley continues to assess that the Brazilian recovery remains "clearly" ahead of the Mexican

Photo: REUTERS/Ricardo Moraes
  • Mexico is expected to return to pre-pandemic levels in the third quarter of 2022;
  • The real currency has advanced 4.9% against the Mexican peso since the November 3 US election.

Morgan Stanley‘s analysts said on Friday that even without the Brazil’s coronavoucher aid the economy will still have room to grow at the beginning of the year with families’ savings.

The assessment comes a day after the Gross Domestic Product (GDP) data showed record growth in the economy in the third quarter, but below expectations.

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Precautionary savings would also be based on the fact that many services that impact higher-income segments – such as travel – remain restricted.

“As long as the fiscal rules are not broken and with inflation remaining under control, an environment of low-interest rates should help to extend the (economic) recovery,” said Fernando Sedano, Thiago A. Machado, and Lucas Almeida in this Friday’s report.

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Experts estimate that Brazilian GDP will return to pre-pandemic levels in the third quarter of 2021, ahead of the biggest rival in Latin America, Mexico, which is expected to return to this level in the third quarter of 2022.

Morgan Stanley continues to assess that the Brazilian recovery remains “clearly” ahead of the Mexican, a scenario that for the bank should continue in the coming quarters.

The real currency has advanced 4.9% against the Mexican peso since the November 3 US election. In the same period, the Ibovespa index jumped 18.4%, and the main index for Mexican shares rose slightly less: 17.3%.

But the risks for both countries remain, including a strong second wave of Covid-19 and an increase in deaths from the disease to the point of leading to further declines in mobility rates.

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Also, “at some point” markets are expected to become more selective and punish economies that have seen “significant” worsen in their fiscal and debt metrics.

“This is where things can play in Mexico’s favor with Brazil, but it is still too early to say and we cannot rule out that Mexican fiscal austerity may be at risk ahead,” said analysts.

(Translated by LABS)

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