Brazil suffers a 0.1% drop in GDP and enters a technical recession | Economy


Workers walk through a petrochemical industry in Camaçari, Brazil.
Workers walk through a petrochemical industry in Camaçari, Brazil.Bloomberg

The Gross Domestic Product (GDP) of Brazil has suffered a fall of 0.1% during the third quarter of this year compared to the previous three months. The data released this Thursday by the Brazilian Institute of Geography and Statistics (IBGE) show an economy that continued to fail to recover in that period, with covid-19 on the rise and vaccination starting. IBGE also released the revision of the seasonally adjusted data for the previous quarter, which modified the GDP result from April to June over the previous three months. In this way, the GDP for the second quarter went from positive 0.1% to 0.4%. With these figures, Brazil is in a technical recession, which indicates that recovering activity in the last quarter will be a more difficult task. Compared to the same period in 2020, GDP has advanced 4%. In the accumulated of the year, this indicator has increased by 5.7%.

The performance of agriculture in the third quarter has also been decisive for the meager result for the period. The sector experienced a significant decline, with a drop of 8% compared to the previous quarter, signaling the end of a golden cycle of the commodities. The fall in the agricultural sector is 9% compared to the same period last year. The decline in activity in the field also affects exports, which have fallen 9.8% between the second and third quarters. According to Rebeca Palis, coordinator of National Accounts at IBGE, the decline in the agricultural sector was a consequence of the end of the soybean harvest, especially. “Being the main Brazilian commodity, agricultural production tends to be lower from the second half of the year. In addition, agriculture comes from a high comparison base, since it was the activity that grew the most during the period of the pandemic and, for this year, the outlook was not so positive, “he says in a statement published by IBGE.

See also  Lyon deny agreeing Bruno Guimaraes deal with Newcastle

The good news came from household consumption, with positive growth for the second consecutive quarter. It increased 0.9% compared to April, May and June, with the start of the recovery in employment and the expansion of credit. The result coincides with a period in which vaccination began to gain momentum, going from 12.7% of people vaccinated with the two doses in July, to 43% at the end of September. “With the advance of vaccination against covid-19 and the consequent increase in mobility and the reopening of businesses, families began to consume fewer goods and more services,” says Palis. Necton Investimentos economist André Perfeito views the numbers cautiously, as the previous adjusted GDP revision exposed a very low base of comparison.

The same is true for the Gross Fixed Capital Formation, which measures what companies invested in production machinery during the third quarter in relation to the same period of 2020. This indicator fell by 0.1% compared to the second quarter, but it increased by 18.8% compared to last year, when the economy was paralyzed due to the pandemic. The investment rate registered by IBGE was 19.4% of GDP, compared to 16.4% in the third quarter of 2020.

Industry and construction

The IBGE numbers highlight the construction sector, which had an increase of 3.9% in the quarter (compared to the second), and 10.9% compared to last year. These data are a reflection of the expansion of credit in the sector, which stimulated a boom of launches in the real estate sector. Construction boosted the industry figures, which grew 1.3% during the period.

See also  The Godfather is crowned the UK's favorite gangster movie - here's how to get your tickets for Showcase Cinema's special screenings

The electricity, gas and water sector, however, fell 4.6%, with the increase in electricity rates, due to the shortage of water. The cost of energy also affected the performance of manufacturing industries, which fell 0.7%, affected by declines in the manufacture of food products, furniture, beverages, electrical material and computer equipment. The services sector advanced 5.8% compared to the same period of the previous year.

If the past data for the first nine months is bad, the future shows that the recovery will be slow and with several obstacles in the way. If, on the one hand, unemployment continues to fall and 60% of the population already has the full vaccination schedule, on the other, there are uncertainties ahead with the new omicron variant. IBGE itself showed that unemployment, despite having fallen, still affects 13.5 million people. Also the earnings of workers are the worst in almost 10 years. Comparing them with October of last year, the drop was 11.1%.

Inflation also affects consumption and future growth projections, as the National Industry Confederation (CNI) showed last month. According to the organization, only electricity prices, which rose with the water crisis this year, will amount to 8.2 billion reais [unos 1.454 millones de dólares] less for GDP in 2021. “This same year, we estimate that the direct and indirect effects of the increase in the price of energy will generate a loss of around 166,000 jobs in relation to the number of people who would be employed without energy prices. the energy will not increase, ”says the study. “The economic impact of the price of energy.”

See also  David Drysdale and Bob MacIntyre take route 66 in Ras Al Khaimah

Brazil is also facing the disorganization of global chains with the pandemic. For the CNI, this bottleneck will only be resolved in the middle of next year. Meanwhile, logistics hubs will continue to put pressure on costs, keeping inflation high.

Subscribe here to the EL PAÍS América newsletter and receive all the informational keys of the current situation in the region


Related Posts

George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

Leave a Reply

Your email address will not be published.