Brazil’s expansion in 2022 will be the worst among large economies, says UN – 15/09/2021

Against the grain of the world’s main economies, Brazil will have serious difficulties in keeping up with the pace of its GDP recovery. Projections released by the UN this Wednesday indicate that the national economy should grow at a rate of 1.8% in 2022, half of the expected expansion for the world economy, of 3.6%. Among the major economies in the world, the Brazilian rate will be the lowest.

The data are from the UN Conference on Trade and Development, in its annual report released in Geneva.

For the entity, the reason for the low growth rate is the political uncertainty regarding the 2022 elections.

In 2021, the world economy’s 5.3% growth is the highest in 50 years, after a collapse in 2020. For 2022, there will be a slowdown to 3.6%. Despite two years of expansion, the world will still be 3.7 percentage points below the income levels it would have reached if the pandemic had not existed.

In total, the UN agency estimates that the world will cumulatively lose US$ 13 trillion between 2020 and 2022. In Brazil, losses between 2020 and 2022 will reach US$ 146 billion, equivalent to 8% of GDP. Between 2020 and 2025, the impact will be US$240 billion for the national economy.

In the case of 2021, the country will have an expansion below the world average. The projection is for a growth of 4.9%, against a world average of 5.3%. Brazil’s performance will also be below the average for the Americas (5.6%) and the average for Latin America, with 5.5%.

In general, emerging economies will have a much higher expansion, with 6.2% in 2021. In China, growth will be 8.3%. The American economy will also have a better performance, with expansion of 5.7%.

The performance of the Brazilian GDP will still be below the average of emerging countries (4.7%) and even rich countries (2.9%).

According to the UN, the national economy managed to resist the pandemic better than its neighbors. “In Brazil, despite the heavy human cost of the pandemic, the economy contracted by just 4.1% in 2020, the smallest impact among the largest Latin American economies,” he said.

“Brazil is expected to grow slightly above its 2019 GDP this year, thanks to the positive effect of higher commodity exports and a relatively larger and well-targeted fiscal stimulus than Mexico and Argentina,” noted the UN annual report.

“Expansionary fiscal and monetary policy helped Brazil mitigate the economic impact of covid-19 and, in 2021, the recovery in commodity prices and a gradual elimination of the fiscal stimulus should help GDP growth by 4.9%”, indicated.

“On the positive side, vaccination and demand for services tend to accelerate in the second half of 2021,” he said.

“On the negative side, the shortage of supply from hydroelectric plants has driven inflation, which, in turn, is forcing the Central Bank of Brazil to raise short-term interest rates,” he warned.

But the biggest risks are for 2022. “The negative forces and political uncertainty associated with the upcoming Brazilian presidential election will likely weigh on prospects in 2022, with growth slowing to just 1.8%,” he says.

Worst rate in 2022

In fact, the projection indicates that the expansion in Brazil will be only 1.8%, while economists in the country already speak of a growth of only 1%. The rate is the lowest among the world’s largest economies.

Here are the UN projections for next year:

India: 6.7%
China: 5.7%
Indonesia: 4.9%
Turkey: 3.6%
France: 3.4%
Saudi Arabia: 3.3%
Germany: 3.2%
Italy: 3%
USA: 3%
Argentina: 2.9%
Canada: 2.9%
Mexico: 2.8%
Korea: 2.8%
Australia: 2.8%
Russia: 2.3%
Japan: 2.1%
UK: 2.1%
Brazil: 1.8%

Inflation worries

Another aspect highlighted by the UN is the devaluation of the real and the concern with inflation. “In Brazil, internal political factors led to a relatively faster depreciation of the national currency than in other developing countries, while a severe drought led the economy to use more expensive sources of electricity,” he explained.

“By mid-2021, the two adverse shocks had increased inflation to nearly 9%, prompting the Central Bank of Brazil to raise its short-term interest rate,” the UN reported.

“Currency devaluation and rising commodity prices also boosted inflation in Mexico, South Africa and the Russian Federation, but so far at a more moderate pace than in Brazil. consumer price inflation between 4% and 6%, which, in turn, led the Central Banks of Mexico and the Russian Federation to tighten monetary policy,” he added.