Brazil Stock Market Hits Bottom Amid Presidential Election Populism Turmoil

(Photo by AFP)

[Asia Economy Reporter Yujin Cho] The Brazilian stock market is showing its worst performance due to negative factors such as next year's presidential election risks, inflationary pressures, and concerns over economic slowdown.

On the 17th (local time), Brazil's representative stock index, the Bovespa Index, recorded 102,948 points, falling just short of breaking below the 100,000-point mark. The Bovespa Index has dropped 13.5% since the beginning of the year and hit its lowest point this year on that day.

The index surpassed 130,000 points at the end of June but has been declining repeatedly due to worsening growth outlooks and concerns over fiscal imbalances.

This decline is the largest among major global stock indices compiled by Bloomberg News.

Investor sentiment has worsened as the Jair Bolsonaro administration, ahead of next year's presidential election, has proposed budget-spending policies, raising concerns about fiscal deterioration.

The Bolsonaro administration pledged to more than double the monthly living support for the poor from 190 reais to 400 reais (approximately 84,500 KRW) by the end of next year.

Experts worry that such election populism policies could not only worsen fiscal conditions but also plunge the Brazilian economy back into recession.

Brazil's inflation continues to rise, lowering expectations for economic growth this year and next. The Brazilian Ministry of Economy lowered its GDP growth forecast in the macroeconomic report released that day from 5.3% to 5.1% for this year and from 2.5% to 2.1% for next year.

Brazil's GDP contracted by -3.5% and -3.3% in 2015 and 2016 respectively, falling into recession, then showed a recovery with growth rates in the 1% range from 2017 to 2019, but recorded a -4.1% growth rate last year due to the impact of the COVID-19 pandemic.

The exchange rate of the Brazilian real against the US dollar closed at 5.5246 reais per dollar that day. The rate fell below 5 reais per dollar at the end of June but has since fluctuated slightly while maintaining an overall upward trend. The real's value has dropped 6.5% this year.

This content was produced with the assistance of AI translation services.