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Fitch: Modest GDP growth seen in Brazil as Bolsonaro takes over


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Fitch: Modest GDP growth seen in Brazil as Bolsonaro takes over

Brazil's GDP should modestly accelerate in 2019 and 2020, with potential for further upside tied to new President Jair Bolsonaro's success in delivering economic reforms, Fitch Ratings said in a report.

The rating agency estimates that real GDP will expand by 2.2% and 2.7% in 2019 and 2020, respectively.

Although appointments by Bolsonaro, who took office Jan. 1, suggest the formation of a market-friendly economic team, "significant uncertainties remain" over the specific policies he will actually pursue as part of his agenda, Fitch said.

In spite of his party securing relevant gains in Brazil's legislature, coalition building will be essential for passing key measures such as the pension reform, which Fitch considers "key for structural improvement in public finances over time" as it accounts for nearly 40% of public spending.

At the same time, the agency noted that Brazil still has vulnerability to changes in international financing conditions and foreign investor appetite. It pointed specifically to commodity price volatility, an economic slowdown in China, and a slower recovery in Argentina as major external risks for 2019.