Brazil’s President Jair Bolsonaro took office at the start of last year with promises to rejuvenate Latin America’s biggest economy. But political turbulence hampered the government’s reform agenda, tight fiscal policy constrained domestic demand and a crisis in neighboring Argentina sapped exports.
"When an economy is weak like this, it doesn't take much to trip it up. When you think back to start of 2019, people were quite optimistic,” William Jackson, chief emerging markets economist at Capital Economics, said by phone from London. “Brazil’s economy is simply not showing signs of significant recovery and, the longer it continues to disappoint, the more people will stop expecting growth above 2%.”
Growth last year was led by family consumption, which rose 1.8% compared to 2018, and investment that grew 2.2%, according to the statistics institute. The last time Brazil’s economy expanded more than 2% was 2013. Economists started 2020 with an outlook for faster recovery this year, but have already begun cutting forecasts — partly a result of the spreading new coronavirus. On March 3, one day before release of Brazil’s activity data, Goldman Sachs cited the virus and its impact on global activity as rationale for lowering its Brazil call to 1.5%, from 2.2% previously.
However, leading indicators for the first quarter “were already pointing to soft growth even before the February intensiﬁcation of the coronavirus outbreak,” Alberto Ramos, Goldman’s chief Latin America economist, wrote in a report.