Paulo Guedes says GDP was stable in the most ‘tragic’ quarter of the pandemic | Economy

The Economy Minister, Paulo Guedes, evaluated this Wednesday (1) that the result of the Gross Domestic Product (GDP) showed stability in the second quarter of this year. “Stable GDP”, he declared, when questioned by the report of the G1 whether the result was good or bad.

Guedes was also asked if the fall in the investment rate is a concern, as it indicates a future evolution in the behavior of the economy. He highlighted another point: the increase in the savings rate — which set a record. “It was the biggest savings rate,” he limited himself to saying.

At an event organized by the Brazil Competitive Parliamentary Front, Guedes said that the GDP result released by the Brazilian Institute of Geography and Statistics (IBGE) shows that the economy “went sideways” in the second quarter, with stability, in what, he said, was the “most tragic quarter of the pandemic”.

“It was precisely in April, May and June of this year, when emergency aid came in again, we maintained our responsibility and commitment to the health of Brazilians,” declared the minister, adding that the economy is growing again.

Data released by the IBGE earlier show a decline of 0.1% of GDP in the second quarter, compared to the previous three months.

The numbers indicate that the Brazilian economy lost steam, after having advanced by 1.2% in the first three months of the year, completing 3 consecutive quarters of growth.

The result came weaker than expected by analysts. The expectation in a survey by Reuters was a growth of 0.2% in the second quarter, in the quarterly comparison.

Falling agriculture and industry

The biggest fall was in agriculture (-2.8%), affected by crop failure, followed by Industry (-0.2%), which has been affected by the lack of inputs and the high cost of raw materials.

On the other hand, services grew by 0.7% compared to the 1st quarter, due to the reopening of the economy with the relief of the Covid-19 containment measures.

Among industrial activities, the worst performance was that of manufacturing industries (-2.2%) and the activity of Electricity and gas, water, sewage, waste management activities (-0.9%). On the other hand, there was an increase of 5.3% in extractive industries and 2.7% in construction.

Among the three large sectors of the economy, only services did not recover the pre-pandemic level, still operating 0.9% below the 4th quarter of 2019. Industry and agriculture were, respectively, 1.6% and 3.3% above the level observed before the health crisis.

From the expenditure perspective, household consumption had zero variation compared to the 1st quarter. Investments fell by 3.6%. Government consumption increased by 0.7%.

Investments measured by gross fixed capital formation (GFCF), which gather company and government spending on machinery and equipment, infrastructure, construction and innovation, fell again (-3.6%) after 3 consecutive quarters of high.

The savings rate, on the other hand, hit a historic record in this second quarter. It was 20.9%, compared to 15.7% in the second quarter of 2020, and was the highest ever recorded in the historical series that, for this indicator, started in 2000.

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