BUENOS AIRES (Reuters) - Brazil’s economy will slowly regain health this year, buoyed by firmer consumer spending and a boost from privatizations, dispelling fears of the kind of social unrest affecting other Latin American nations, a Reuters poll of economists showed.
The economy is expected to grow 2.1% in 2020, according to the median of 43 estimates compiled Jan. 13-20, almost twice the official forecast for 2019. However, the survey’s projection is well short of the government’s 2.4% view.
Many private forecasters are wary of predicting a stronger recovery after three years of meager growth that have marked the weakest-ever recovery from recession.
President Jair Bolsonaro’s government has failed to inspire a consistent economic upswing during his first year in office despite sweeping reforms and the privatization of state-run businesses.
Goldman Sachs analysts pencilled in a 2.7% rise in consumer spending this year from 1.8% in 2019.
“But significant slack in the labor market and subdued consumer confidence may cap the buoyancy of the recovery,” they wrote in a report last week.
Hopes for a quicker turnaround last year were dashed as economic sentiment took a hit when Bolsonaro’s drive to overhaul the country’s pension system met unexpected resistance from lawmakers, who eventually passed a diluted bill.
Market participants are now placing their bets on new proposals aimed at further reducing the size of the state and generating extra income, like the planned sale of Brazil's largest utility, state-run Centrais Eletricas Brasileiras SA ELET6.SA, known as Eletrobras.
Expectations are high despite emerging signs of more trouble in Congress. Officials will have a short time window to push for significant changes before attention starts focusing on the campaign for local elections in October.
Brazil’s central bank will do its part, keeping rates at record lows for more than one year.
“A gradual process of normalization may start in the second quarter of 2021,” Rodrigo Abreu, an economist at Caixa, said.
Bolsonaro’s free-market policies have faced intense opposition and protests. But severe discontent, of the type that struck neighboring Andean countries in 2019, has been absent since many voters still believe in his promises of progress.
Meanwhile, Mexico’s economy has been operating close to stagnation and will continue to do so in 2020, expanding just 1.1%, according to the median estimate from the poll.
Pursuing a prudent approach, Banxico, the central bank, is making an effort to stand out as the pillar of the country’s economic confidence, compensating for mutual distrust between President Andrés Manuel López Obrador and the private sector.
It has come at a cost, though.
“Interest rates in Mexico remain relatively high, which is restraining the growth outlook,” said Jennifer Licis, economic analyst at Wells Fargo, who foresaw a “modest recovery” supported by some monetary easing.
In contrast with Banxico’s success at controlling inflation and shoring up the peso currency, many other indicators are flashing red in key sectors, from car production to foreign remittances.
López Obrador last week hailed the U.S. Senate’s approval of the United States-Mexico-Canada Agreement (USMCA) trade deal, forecasting it would benefit the Mexican economy. However, trade flows will remain largely unchanged.
Any fresh wave of protectionism in the U.S. as the 2020 presidential campaign continues could threaten the peso and force Banxico to postpone its careful monetary stimulus, stifling the nascent revival.
Elsewhere, Chile is now expected to grow only 1.4% this year, the lowest rate since the 2008-2009 global financial crisis and half the forecast in October’s poll, compiled right before a revolt against the country’s economic model.
Some are wondering whether Colombia, a nation with a similar policy orientation and strong ties to the United States, could be next. Union leaders are already warning of an escalation of protests this year.
“This could lead to softer economic activity in case investment projects are delayed,” said Sergio Olarte, head economist at Scotiabank Colpatria.
In January’s poll, Colombian growth was seen at 3.2% this year, the fastest in the region.
For its part, Argentina is looking at its third consecutive year of recession with 40-50% inflation. President Alberto Fernández is seeking to renegotiate a rampant debt burden as a prerequisite for the country’s economic resurrection.
Reporting and polling by Gabriel Burin; Additional polling by Indradip Ghosh in Bengaluru; Editing by Ross Finley and Bernadette Baum
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