Brazilian economic climate recorded its best value in 8 years through July – FGV index

RIO DE JANEIRO, BRAZIL – The Brazilian Economic Climate Index (ECI) rose to 116.5 points in the Getulio Vargas Foundation’s (FGV) Latin America Survey, which covers the third quarter, up from 82.2 points in the previous survey second quarter.

It was the highest score since January 2013 (120 points), influenced by a faster pace of vaccination against Covid-19 in the country – which has helped improve experts’ perceptions of the country, said Lia Valls, FGV researcher in charge of the survey. However, the economist warned that the future trend of the indicator is uncertain.

This is because Brazil’s health, macroeconomic and political conditions deteriorated in August, which is likely to affect the next ECI, she said. Lia did not rule out the possibility that the ECI in the country could fall again.

Regarding the ECI for the third quarter, the expert said that Brazil’s good performance helped improve the overall economic climate in Latin America. The indicator for the Latin American continent rose from 81.2 points to 99.7 points between the second and third quarters.

“Brazil and Mexico are the countries that stand out [in the results] in the Latin America survey,” she recalled of the survey, which was compiled in July based on the responses of 149 experts surveyed. In Mexico, the ECI also increased from 81.3 to 92.4 points during the same period.

The researcher explained that the favorable timing of the vaccination against Covid-19 in July caused the index of the current situation (ISA), one of the two sub-indicators that make up the ECI, to increase from 17.6 points to 69.2 points between the last survey and the survey announced today by the Foundation.

The increase was so large that it partially offset the decline in the Expectations Index (IE), another sub-indicator of the ECI, which fell from 182.4 to 176.9 points between the second and third quarters.

However, the responses collected to calculate the ECI data released today were from July, the researcher pointed out. “A lot changed in August,” she noted. In terms of health, the delta variant of Covid-19, which is more transmissible and originated in India, has spread nationwide this month, the technician said.

“This delta scenario of today did not exist in July,” she commented. At the same time, concerns have increased about the rise of inflation in the country in the macroeconomic field. In August, the researcher said that inflation rose faster than the market expected, leading to an upward revision of inflation forecasts.

It also pointed out that the political scenario deteriorated in August compared to July. This month saw several crises between institutions, the technician recalled. “The political turmoil has increased sharply,” she said. “Things have changed very quickly,” she summarized.

Considering these factors, the researcher notes that it is impossible to forecast a trend of continuity of the favorable ECI result in Brazil in the coming months. She stressed that the Brazilian scenario is currently characterized by many unpredictable factors in different areas, which makes it difficult to make forecasts, she pointed out. “I think we have a lot of uncertainties at the moment,” she admitted.