What is future of Brazil ???​

We all knew it would happen, but now it's official: Brazil is once again in recession. Just a handful of years after barely emerging from its longest economic slump on record, Latin America's biggest economy finds itself back in the red once more, as a direct result of the C O V I D-19 pandemic. The Brazilian Institute of Geography and Statistics (IBGE) recently announced GDP fell a monumental 9.7 percent in Q2 2020—just above market expectations, but still the worst quarterly result ever recorded.

Industry shrank 12.3 percent in the three months ending in June, and the crucial services sector fell 9.7 percent. Agriculture was the sole silver lining, rising 0.4 percent in comparison to Q1.

However, these disappointing results reflect the eye of the coronavirus storm, from which economists consulted by The Brazilian Report believe the country is emerging.

“The result could actually have been much worse and the Brazilian economy is recovering faster than expected,” says Sergio Vale, chief economist at MB Associados. “That makes room for a lower-than-expected yearly drop.” Mr. Vale revised his yearly GDP predictions from a 6-percent contraction to 4.8 percent after today's announcement.

Indeed, entering into recession had already been priced into the local market, and the benchmark stock index Ibovespa largely ignored the IBGE's announcement, focusing instead on promises by President Jair Bolsonaro and Economy Minister Paulo Guedes to submit a public service reform by September 4. The government presented a public sector reform bill to Congress on September 3.

Furthermore, the GDP figures come one day after the government submitted a miserly budget proposal for 2020, encouraging investors who feared Brazil may break with public spending rules and increase its debt.

“The GDP result was already expected,” says Marco Harbich, a strategist at Terra Investimentos and columnist at The Brazilian Report. “What matters from now on is the [government’s] commitment toward balancing the public accounts.”

Explanation:

As is often the case during Brazilian economic hardship, agribusiness stood as the solitary bright spot in a disappointing Q2 performance. The sector grew 1.2 percent year-over-year off the back of booming harvests, lower foreign exchange rates, and increasing demand. Mr. Vale adds that the Brazilian economy is highly dependent on commodities, meaning the positive momentum for the sector creates more dynamism for the entire agribusiness chain.

Lower interest rates, meanwhile, have created conditions for resilience in the construction industry. In Q2, it saw a drop of 5.7 percent, which, while steep, far outperformed industry as a whole. Meanwhile, real estate activities rose 0.5 percent in Q2, corroborating this tentatively positive outlook, says Lucas Carvalho, an analyst at Toro Investimentos.

“As civil construction is a labor-intensive sector, this shows the possibility of faster recovery than previously expected,” he says.

Economists unanimously point toward the importance of the government's emergency coronavirus aid program in preventing an even more severe drop in consumption. The R$600 ($112)monthly payments have become increasingly important in the revenue of Brazilian families; in July, the entire amount paid out by the federal government in benefits surpassed the salary losses suffered due to the pandemic.

Therefore, despite plans to reduce the monthly stipends to R$300, continuing the program until the end of the year will help support the economy in the coming months.

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