MOODY'S: Brazilian Industry Should Not Have A Solid Recovery Before 2019

(RTTNews) - Brazilian industry will record solid growth only after a gradual recovery in consumption and industrial activity, which should not happen before 2019, Moody's rating agency reported.

In the agency's assessment, inflation and lower interest rates are "strongest signs of a noticeable rebound in Brazil's macroeconomic fundamentals since mid-2016."

However, Moody's analysts consider that it is still early to confirm a sustainable recovery of consumer goods, noting that "the trend is gaining momentum."

"Low disposable income, high unemployment, weak consumer and business confidence and cautious lending from local banks will all keep constraining domestic demand," the agency said.

The most credit-dependent sectors should note a slow recovery. "Banks remain selective in their lending, and mortgage issuance is expected to rise only gradually in 2018," Moody's said.

Of the sectors that are more difficult to overcome, Moody's highlights the segment of residential real estate construction, which "should not return to pre-recession size until at least 2020", and steel, which "needs at least four to five years to return to pre-crisis levels," the agency added.

Moody's also says steelmakers should not have a significant recovery in the medium term either.

"The sharp increase in auto production in Brazil in 2017 has propped up a slight recovery in sales of flat steel, but long steel still struggles with low infrastructure and housing investments," Moody's said.