Brazil | The new “corona voucher” creates a poor trade-off

With Brazil’s senate approving a BRL44bn second tranche of the popular “corona voucher” cash transfer scheme, we find that the boost to GDP is big at first (+0.7% in Q2) but fades quickly.

Importantly, the boon to growth through another relaxation of the fiscal rule comes at the expense of higher borrowing costs: We now see the 10-year bond yield climbing toward 9% by year-end, up 75bps from our previous forecast.

Topics: Coronavirus