The 2014 Football World Cup is proving to be a welcome distraction from yet more downbeat news on Brazil’s economy over the past month. Our GDP Tracker suggests that, after dropping to just 1.9% y/y in Q1, growth has slowed further in Q2. Meanwhile, the current account deficit is showing no signs of narrowing, while inflation is rising once again and appears on course to breach the upper limit of its target range next month. All of this will test the mettle of policymakers at the central bank who, having previously signalled their intention to delay any further tightening of monetary policy until after elections later this year, may now be forced into action. On the pitch, Brazil is living up to their pre-tournament billing as favourites. Off it, the economic gloom is gathering.
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