BRAZIL MACROECONOMIC

OUTLOOKAugust, 2020

Economic Research Department

o Economic activity continued to outperform expectations, suggesting that GDP will slide less thaninitially thought in 2020.

o We revised our 2020 GDP growth forecast from -5.9% to -4.5%, and expect growth to rebound to+3.5% in 2021. Manufacturing output and retail sales are conforming a more robust improvement inconfidence.

o External accounts adjustment is likely to be more moderate going forward. We expect that theconfirmation of a more positive domestic growth trend, coupled with less aversion to external risk, will leaveroom for the exchange rate to stay at BRL/USD 5.10 at year-end 2020 and 2021.

o The Broad Consumer Price Index (IPCA) is expected to end 2020 at 1.9%, reaching 3.1% in 2021. Thisupward trend is to be expected, as inflation is moving back towards the center of the target range after anatypical period of deflation during the pandemic.

o We expect the benchmark Selic rate to remain at 2.25% through the end of this year, and to end 2021at 3.00%. The balance of risks continues to suggest caution. We expect monetary policy to normalizetowards the neutral interest rate, bringing the Selic rate to 3.00% at year-end 2021.

BRAZIL – MACROECONOMIC OUTLOOKUpdates

2

GDPAnnual rate of change, %

Source: IBGE, Bradesco

3

4.4

1.4

3.1

1.1

5.8

3.24.0

6.15.1

-0.1

7.5

4.0

1.93.0

0.5

-3.5 -3.3

1.3 1.3 1.1

-4.5

3.5

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Crescimento anual do PIB, em %

Investment

Government Consumption Household Consumption

Source: IBGE, Bradesco

GDPAnnual rate of change, %

8.5

2.0

6.7

12.0 12.3

-2.1

17.9

6.8

0.8

5.8

-4.2

-13.9-12.1

-2.6

3.92.2

-7.1

6.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

-0.2

2.6

3.8

1.6

3.9

2.0

3.64.1

2.0

2.9

3.9

2.2 2.3

1.5

0.8

-1.4

0.2

-0.7

0.4

-0.4

0.6

2.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

4.0

0.81.3

-0.5

3.94.4

5.36.4 6.5

4.5

6.2

4.8

3.5 3.52.3

-3.2-3.8

2.0 2.1 1.8

-5.7

3.4

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Renda real

4

5.0

3.74.3

5.84.8

2.1

5.8

3.52.9 2.8

1.0

-2.7-2.2

0.81.5 1.3

-5.0

3.5

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Serviços

2.01.1

4.63.2

5.8

-3.7

6.75.6

-3.1

8.4

2.8 3.3

-5.2

14.2

1.4 1.33.0 3.5

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Título

ServicesAgricultural

Source: IBGE, Bradesco

GDPAnnual rate of change, %

8.2

2.0 2.0

6.2

4.1

-4.7

10.2

4.1

-0.7

2.2

-1.5

-5.8-4.6

-0.5

0.5 0.5

-4.5

3.0

-10.0

-5.0

0.0

5.0

10.0

15.0

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Renda real

5

Industrial

INDUSTRY, RETAIL AND SERVICESSeasonally adjusted level

Source: IBGE, Bradesco

6

60,0

65,0

70,0

75,0

80,0

85,0

90,0

95,0

100,0

14 15 16 17 18 19 20

Indústria

Varejo

Serviços

Retail

Services

Industry

CONFIDENCE INDEXSeasonally adjusted level

Industrial Services

Retail Construction

Source: FGV, Bradesco

86.1

60

70

80

90

100

110

120

10 11 12 13 14 15 16 17 18 19 20

7

90.1

100.0

45.0

55.0

65.0

75.0

85.0

95.0

105.0

115.0

125.0

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Índice de Confiança da Indústria - Série com ajuste sazonalFonte: FGV

76,6

50,0

60,0

70,0

80,0

90,0

100,0

110,0

120,0

09 10 11 12 13 14 15 16 17 18 19 20

Título do Gráfico

ICS Neutro

83,7

60

70

80

90

100

110

120

11 12 13 14 15 16 17 18 19 20

indice confianca dessaz

EMPLOYMENT AND INCOME

Unemployment Real Income

Source: IBGE, Bradesco

9.8%9.3%

9.8%

8.8%

8.0%8.5% 8.2%

7.6% 7.3% 7.2%6.8%

8.3%

11.3%

12.8%12.3% 12.1%

13.5% 13.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Título do Gráfico

-1.7%

1.1%

4.1%

3.4%3.3%3.4%3.3%2.9%

4.1%

3.3%

2.1%

-0.8%

-2.3%

1.5%1.6%

0.6%

-0.5%

2.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Renda real

8

NOMINAL EXCHANGE RATER$/US$

Source: Bloomberg, Bradesco

5.15

3.00

3.20

3.40

3.60

3.80

4.00

4.20

4.40

4.60

4.80

5.00

5.20

5.40

5.60

5.80

6.00

Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20

9

BRL vs. EMERGING MARKET CURRENCIESAccumulated BRL fluctuation vs. EMC median and percentiles

Source: Bloomberg, Bradesco

10

4.31

5.15

3.5

4.0

4.5

5.0

5.5

jan/2019 jul/2019 jan/2020 jul/2020

75% 25% 10% Last Copom Median BRL

INTEREST RATE DIFFERENTIALBrazil and peers*, 1 year

Source: Bloomberg, Bradesco * South Africa, Chile, Colombia, Peru, Mexico, Turkey and Australia

11

-1.1

-4

-2

0

2

4

6

8

10

12

11 12 13 14 15 16 17 18 19 20

NOMINAL EXCHANGE RATER$/US$, end of period

Source: Bloomberg, Bradesco

1.952.32

3.53

2.892.65

2.342.14

1.77

2.34

1.74 1.671.88 2.04

2.342.66

3.90

3.26 3.31

3.874.03

5.10 5.10

0.00

1.00

2.00

3.00

4.00

5.00

6.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Título do Gráfico

12

Source: IBGE, Bradesco

CONSUMER PRICES INDEX – IPCA Annual rate of change, %

13

7.7%

12.5%

9.3%

7.6%

5.7%

3.1%

4.5%

5.9%

4.3%

5.9%6.5%5.8%5.9%6.4%

10.7%

6.3%

2.96%3.7%

4.3%

1.9%

3.1%

0%

2%

4%

6%

8%

10%

12%

14%

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

1.07%1.11%

2.12%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

3ma

6ma

12m

IPCA – AVERAGE INFLATION CORESCores at historically low levels

Source: IBGE, Bradesco

14

MARKET EXPECTATIONS – IPCAFalling inflation expectations

Source: BCB, Bradesco

1.7

3.1

1.5

2.0

2.5

3.0

3.5

4.0

4.5

jul/18 nov/18 mar/19 jul/19 nov/19 mar/20 jul/20

Título do Gráfico

2020 2021

15

15.75%

19.00%

25.00%

16.50%18.00%

13.25%

11.25%

13.75%

8.75%

10.75%

7.25%

10.00%11.75%

14.25%13.75%

7.00%6.50%

4.50%

2.25%3.00%

0%

5%

10%

15%

20%

25%

30%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Título do Gráfico

NOMINAL INTEREST RATE We expect the Selic rate to remain at 2.25% in 2020

Source: BCB, Bradesco

16

2.4% 2.1%2.8%

1.2%

2.8%2.1%

1.6% 1.4%

-0.3%

-1.9%-2.6%

-1.9% -1.8%-1.2%

-11.6%

-2.9%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021*

17

CENTRAL GOVERNMENT PRIMARY BALANCE% of GDP, with new fiscal measures

Source: STN, Bradesco

Source: BCB, Bradesco

GROSS PUBLIC DEBT% of GDP

18

56%59%

52% 51%54% 52%

56%

66%70%

74%77% 76%

96% 97%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021*

Source: Bradesco

OUR FORECASTS...

Bradesco economic forecasts are revised at the beginning of each month. During moments of greater volatility, the level of uncertainty and error margins naturally rise, especially between revisions.Our forecasts are based on the assumption that the adjustments necessary to ensure the sustainability of Brazil’s macroeconomic framework will be implemented over the next few years. If theseadjustments do not materialize or are better than expected, the forecast could be altered significantly. Last updated on July 28th, 2020.

19

2017 2018 2019 2020 2021

GDP growth (%) 1.3 1.3 1.1 -4.5 3.5

Consumer inflation - IPCA (%) 2.95 3.75 4.31 1.9 3.1

Wholesale inflation - IGP-M (%) -0.5 7.5 7.3 8.5 4.0

Selic Rate (%, eop) 7.00 6.50 4.50 2.25 3.00

Exchange Rate (BRL/USD, eop) 3.31 3.87 4.03 5.10 5.10

Industrial Production (%) 2.5 1.0 -1.1 -4.5 3.0

Retail Sales (%) 4.0 5.0 3.9 -6.0 4.5

Job Creation (in thousands) 1899 966 1816 -5200 1904

Unemployment Rate (% of labor force, avg) 12.7 12.3 12.1 13.5 13.5

Outstanding Credit Growth (%) -0.4 5.1 6.5 5.0 7.6

Trade Balance (USD bn) 64.0 53.0 39.4 58.0 66.9

Current Account (USD bn) -15.0 -41.5 -50.8 -7.7 -7.8

Primary Balance (BRL bn) -111 -108.3 -61.9 -864 -225

Gross Debt (% of GDP) 74.1 76.5 75.8 96.0 96.7

DEPEC-BRADESCOwww.economiaemdia.com.br

DEPEC - BRADESCO does not accept responsibility for any actions/decisions that may be taken based on the information provided in its publications and

projections. All the data and opinions contained in these information bulletins is carefully checked and drawn up by fully qualified professionals, but it

should not be used, under any hypothesis, as the basis, support, guidance or norm for any document, valuations, judgments or decision taking, whether of

a formal or informal nature. Therefore, we emphasize that all the consequences and responsibility for using any data or analysis contained in this

publication is assumed exclusively by the user, exempting BRADESCO from all responsibility for any actions resulting from the usage of this material. We

all point out that access to this information implies acceptance in full of this term of responsibility and usage.

The reproduction of the content in this report partially or in full is strictly forbidden except if authorized by BRADESCO or if the Sources the name of the

authors, publication and BRADESCO are strictly mentioned.

Updated: July 28th, 2020

20