Bradesco rules out economic recession in 2022

The increase in fiscal and political uncertainty in the country has led economists to revise projections for the growth of the Brazilian economy for the next year, with forecasts that already point to a recession in 2022 — at the end of October, amidst discussions about the scoop in the spending ceiling, Itaú revised its projection for the GDP (Gross Domestic Product) for the next year from an expansion of 0.5% to a fall of 0.5%.

In Bradesco’s assessment, although the scenario really brings important risks, such as political and related to energy rationing, an economic recession should not be expected. The perception of the bank’s economists, however, has been deteriorating rapidly in recent weeks.

According to Fernando Honorato, Bradesco’s chief economist, inflation should lose strength in the coming months, in an environment in which he predicts that public accounts will remain under control, and with the full reopening allowed by the advance of vaccination, boosting consumption only moderate in the face of higher interest rates.

“I think it is unlikely that inflation will get out of control,” stated Honorato, during a presentation at the Bradesco Day event this Wednesday (10).

On Wednesday, the IBGE informed that the IPCA rose 1.25% in October, the highest since 2002. As a result, the country’s official inflation reached 10.67% in 12 months.

Despite the challenges on the horizon, Honorato also said that there is already much negative in prices and market forecasts.

“The indebtedness of companies [com ações listadas em Bolsa] in Brazil it is at the lowest level in at least 20 years, this is a component that gives us comfort to bet that the country will not have a recession in 2022”, stated the chief economist at Bradesco.

The bank works today with a growth of around 0.75% of the Brazilian economy in 2022, projection revised on November 5th. In October, the bank had already revised its GDP estimate for next year from 1.8% to 1.6%.

In the Focus report, the median of economists’ estimates, falling for five weeks, points to a growth of 1% in GDP next year.

Revisions for the pace of economic activity ahead come in the wake of a deterioration in expectations for inflation and interest rates – Bradesco now estimates a Selic rate of 10.25% at the end of 2022, compared to 8.5% in the month past, with the projection for inflation going in the range of 3.8% to 4.5%.

Although commodities on the international market continue to provide some support for the Brazilian terms of trade and even in view of the expectation of greater monetary tightening by the Central Bank, Bradesco predicts that the Brazilian currency should remain undervalued this year and next.

The bank projects the dollar exchange rate at R$ 5.50 at the end of 2021, reaching R$ 5.70 in December 2022. “Brazil must have a relatively poor performance compared to the rest of the world [em 2022]”, said Honorato.