Reopening Major World Economies After Worst Of Pandemic COVID-19 left behind, it was supposed to be the main topic of the markets in the second half of 2021, but the political risk and water crisis in Brazil and signaling the cancellation of monetary stimulus by The federal reserve us USA they should divert the attention of domestic investors and jeopardize growing optimism.

In the USA and EuropeProgress in vaccination against covid has led to a sharp decline in the number of new cases and deaths, which has allowed the rules of social distancing to be almost completely relaxed. In the US, indicators of economic activity were already anticipating a stronger recovery from the first quarter.

In recent weeks, the market has also begun to revise its forecasts for eurozone GDP growth this year upward, as several countries in the bloc have begun to reopen their economies, in particular the services sector, including tourism, which has been hardest hit by the pandemic.

In Brazil, immunization is finally gaining momentum. The seven-day rolling average of the first dose of vaccine against covid reached 1,426,813 on Monday. Seven days ago this figure was 1,242,303 people, and 30 days ago – only 47,297 people.

Growth projections START Brazil is improving within ten weeks by 2021, according to the latest Focus survey and is now pointing to 5.05% growth. Four weeks ago, analysts were forecasting 3.96% growth.

The big leap came after the disclosure. BigsGDP for the first quarter of this year, which grew by 1.2%, easily surpassed the market forecast for growth of 0.7%. The second wave of the pandemic had less than expected impact on economic activity.

On the outside, the biggest threat to the performance of developing countries, including Brazil, in the second half of the year comes from the likelihood that the Fed expects the removal of monetary stimulus, the so-called “cut”. This could, for example, reduce resource flows to developing countries.

At your last meeting money-credit policyMost Fed officials are currently projecting the first US base rate hike in 2023. Previously, most expected the base rate to remain unchanged until at least 2024.

This sharper signal from the Fed was in part a reaction to the sharp acceleration inflation American. In May, the annual consumer price index in the US reached 5.0%, the largest increase since August 2008. The concern is whether this surge in inflation will be temporary or not.

According to Fabrizio Tachetto, investment director and founder of ACE Capital, the peak of inflation in the US is already behind us, and at the same time, the Fed will not be so aggressive in removing monetary stimuli. “With more weighted inflation figures, the Fed will have more time and start a ‘gradual decline’ process early next year,” Tachetto said. “This will create undue optimism in all markets and, in particular, in emerging markets.”

Discharge inflation, in fact, it will be an important topic for the market as well as for central bank Brazil, especially after the water crisis, has forced to activate thermal power plants, which have higher energy production costs.

The Tier 2 red flag, the most expensive in the system, will also go into effect in July, for the second consecutive month, and with a higher rate adjustment. As a result, many analysts began to include a greater contribution of the energy sector to the July inflation. For 2021, the inflation forecast is already at the level of 5.97%.

But the water crisis is not the only factor that could limit optimism about the Brazilian economic recovery in the second half of the year: the implications CPI to Covid not Senategiven the accusations directly against the president Jair Bolsonaro The purchase of the Indian vaccine Covaxin promises to further exacerbate the political turmoil ahead of the 2022 presidential election. Optimism is currently prevailing with the emergence of new vaccines and the prospect of economic recovery in the second half of the year. But there are many things that could threaten this scenario.

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