Investors reduced their economic outlook over the next decade with the Welfare Reform to 620 billion reais, up from 690 billion reais just two months ago, according to the average estimate from a Morgan Stanley customer survey.
While 95 percent of the more than 125 respondents expect Congress to endorse welfare reform, the slow and complicated journey of the bill in recent weeks has forced investors to lower their expectations.
An economy of 620 billion reais would be a “more reasonable” expectation, according to Morgan Stanley. But that would represent only half of the revised target of 1.237 trillion reais, announced earlier this month by the government.
The latest average estimate is 10 percent lower than the previous Morgan Stanley customer survey in February and masks some notable shifts in opinion in just two months.
Now 42 percent of respondents expect an economy of 600 billion reais or less, more than double the 20 percent of February, while the percentage of respondents predicting 500 billion reais or less tripled from 4 percent to 12 percent.
The share of those expecting a $ 700 billion to $ 800 billion economy fell to 16 percent, almost half of the 29 percent in February, and the proportion of investors expecting more than 800 billion reais fell from 18 percent to 11 percent percent, the survey showed.
The big increase was in the range of an economy of 500 billion to 600 billion reais. About 30 percent of respondents now expect this level of savings, almost double the 16 percent in February.
Investors are overwhelmingly expecting the Chamber of Deputies to approve the reform in the second half of this year. Only 5 percent of those interviewed expect approval at the House before the end of June, a goal that lawmakers and government officials of President Jair Bolsonaro still intend to achieve.
Thirty percent of respondents said the House vote will take place in August, 23 percent said in September and 20 percent cited July. In the latest survey, 39 percent of investors were expecting a House of Representatives vote in the first half of the year, probably in June.
The survey also showed investors’ optimism about the real declined. Customers see the real strengthening a little by the end of the year to 3.85 per dollar from just under 4.00 now, instead of 3.60 in the previous survey.