Brazil’s GDP retreats 0.1% in the 2nd quarter and recovery loses steam | Economy

The Gross Domestic Product (GDP) of Brazil retreated 0.1% in the 2nd quarter of 2021, in comparison with the three immediately previous months, as disclosed this Wednesday (1) by the Brazilian Institute of Geography and Statistics (IBGE).

The IBGE numbers show that the Brazilian economy lost steam, after an increase of 1.2% in the first 3 months of the year and after 3 quarters of high.

“Compared to the same quarter of 2020, the GDP grew 12.4%. In the first half, the GDP accumulated an increase of 6.4%. In the accumulated in the four quarters, ended in June 2021, the GDP grew 1.8%” , informed the IBGE.

Despite the frustrating result, GDP remained at the level from the end of 2019 to the beginning of 2020, the pre-pandemic period, according to IBGE, but is now 3.2% below the highest point of economic activity in the historical series, reached in the first quarter of 2014.

GDP 2nd quarter/21 — Photo: Economy G1

Agriculture and industry fall

The biggest fall was in agriculture (-2.8%), followed by Industry (-0.2%). On the other hand, services grew by 0.7%. From the perspective of expenditure, household consumption had zero variation and investments dropped 3.6%.

The GDP is the sum of all goods and services produced in the country and during a certain period and serves as a kind of thermometer for the evolution of activity and the capacity of an economy to generate wealth and income.

Main GDP highlights in the 2nd quarter:

  • Agriculture: -2.8%
  • Industry: -0.2%
  • Services: 0.7%
  • Household consumption: zero
  • Government consumption: 0.7%
  • Investment (GFCF): -3.6%
  • Import: -0.6%
  • Export: 9.4%

Rua Antonio Agú, better known as the Osasco sidewalk, in Greater São Paulo, in an image of August 12th, after the end of restrictions in the state.) — Photo: Aloisio Mauricio/Fotoarena/Estadão Content

Despite the advance of vaccination against Covid-19 and the end of measures to restrict time and public in much of the country, persistent inflation, political tension and “fiscal risks” (sustainability of public accounts) have increased in recent weeks the level of uncertainty about the pace of the recovery and caused downward revisions to economic forecasts.

The financial market’s expectation for economic growth in 2021 was reduced from 5.27% to 5.22%, according to the latest Focus survey by the Central Bank. For 2022, the average of the projections is at 2%, but part of the analysts already sees a growth closer to 1.5%.

In 2020, in the first year of the pandemic, the Brazilian economy dropped 4.1%, registering the biggest contraction since the beginning of the current historical series of the IBGE, started in 1996, which removed Brazil from the list of the 10 largest economies in the world.

Economists believe that the heating of the services sector – which employs the most in the country and with the greatest weight in GDP – should help improve the labor market and ensure that GDP in the third and fourth quarter remains in the blue, but they warn that the risks of new brakes on the recovery, including the prospect of further increases in the basic interest rate (Selic), a worsening of the water crisis and a worsening of the political environment, due to repeated threats by President Jair Bolsonaro to the democratic order.

Market analysts raise the inflation estimate to 7.27% and see lower GDP rise in 2021

Market analysts raise the inflation estimate to 7.27% and see lower GDP rise in 2021