Brazilian GDP may have negative results in the first quarter of 2019

Several Brazilian banks reduced their forecasts for the Brazilian GDP growth in the first quarter of 2019. In recent days, Itaú has reduced its expectation of 2% growth of Brazilian GDP in 2019 to 1.3%. Safra bank lowered its forecast from 2% to 1.5%. Bradesco, which projected a growth of 2.4% in GDP growth in Brazil in 2019, changed its expectation to 1.9%.

The worst projection was due to Banco Fator, which had forecast a growth of 1.7% of the Brazilian GDP in 2019. Now, Banco Fator understands that Brazilian GDP growth should be at 1.3% in 2019. The Factor also pointed out that the first quarter of 2019 should be marked by a decrease of 0.7% in GDP.

Because of these reductions, there is, therefore, a large decrease in bets favorable in relation to Brazil between domestic and foreign investors.

The current uncertainties in the political scenario and the reform agenda certainly greatly delay economic growth because it greatly reduces growth expectations for the Brazilian economy. However, this is the third consecutive year in which market expectations are reduced considerably. This points to a recurring error in the analyses made by economists in relation to the Brazilian political structure.

The financial market players erred in analyzing the Temer government and now erred again in expecting Jair Bolsonaro's presidency a minimally organized government. So far, what has been seen was a lot of confusion, unpreparedness and a tendency to give up the liberal agenda against any pressure, as occurred in the case of Petrobras.

According to Reuters, "although Bolsonaro vowed orthodox economic policies in his far-right presidential campaign last year, his first 100 days in office have raised concerns that more populist factions in his government may have an upper hand over free-market voices".

This shows a huge gap between market analysis and expectations and the real capacity for reform and to carry out economic policies that Brazilian politicians have.