ISSN 2330-717X

Brazil Revises Growth In 2021 GDP Forecast To 4.5%

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By Alana Gandra

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The projection for the growth in Brazil’s gross domestic product (GDP) was revised down by the Institute of Applied Economic Research (IPEA), a federal foundation linked to the country’s Ministry of Agriculture. The figures released Wednesday (Dec. 22) move the estimated 4.8 percent surge in the GDP, in the quarter ending in September, to 4.5 percent. In 2020, Brazil’s GDP sank 4.1 percent.

In the quarterly assessment of the Brazilian economy, the reduction took into account economic activity indicators from the government’s statistics agency IBGE on the third quarter as well as October, both below the expected.

The negative impact in October should be mitigated by November indicators. IPEA expects all the month’s consolidated data to result in a 0.6 percent increase in industrial output; 0.4 percent in real revenues for services; and 0.3 percent in retail sales. Sales in expanded trade—which includes vehicles and construction materials—should shrink 0.7 percent in the month.

The three main sectors in the economy had their increases revised by IPEA. Industry should rise 4.9 percent in 2021; services 4.5 percent. Agriculture saw its expansion altered from 1.2 to a 1.2 percent decline this year, following climate issues that affected the harvest and a deterioration in the performance of beef production, in addition to a sharp revision in the sector in 2020 in the data from IBGE’s National Accounts.

A landscape foreseen – 2022

For next year, IPEA’s predicted GDP growth was revised from the previous 1.8 percent to 1.1 percent. The change was influenced by the increase in inflation, which impacted families’ purchase power, in addition to the tightening of the country’s monetary policy, stemming both from the inflation and from higher interest in the credit market, which may have negative impacts on economic activity in 2022.

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The institute, on the other hand, reported that the Brazil Aid (Auxílio Brasil) and the expected recovery in employment may both exert a positive influence on demand, in addition to an increase in investment in infrastructure. In 2022, agriculture should also see a rebound, with an estimated surge of 2.8 percent. Services should see a rise of 1.3 percent.

However, IPEA director for Studies and Macroeconomic Policies José Ronaldo de Castro Souza Júnior warned that there are a large number of uncertainties regarding the COVID-19 pandemic, which still plays a major role in the economy.

“We’re predicting that the economy will grow substantially next year. Nonetheless, the degree of uncertainty increased sharply due to factors like the quick dissemination of the new variant of the COVID-19 virus worldwide and the possible change in the monetary policy of developed nations,” he declared.

IPEA further reported that inflation has molded the global economy, with dramatic spikes in commodity prices, which can be seen reflected on consumer prices across a number of countries.

Inflation

IPEA also revised predictions for the inflation. The forecast for the National Broad Consumer Price Index (IPCA) in 2021 went from 9.8 percent in November to ten percent in December. The National Consumer Price Index (INPC), in turn, had an increase in its estimated growth from 10.1 to 10.2 percent.

For next year, IPCA’s projections remained at 4.9 percent for the IPCA and 4.6 percent for the INPC, and were based on the expected accommodation of prices of oil and the other commodities, as well as a lower likelihood of intense weather effects, and a projected increase in harvest.

ABr

Agência Brasil (ABr) is the national public news agency, run by the Brazilian government. It is a part of the public media corporation Empresa Brasil de Comunicação (EBC), created in 2007 to unite two government media enterprises Radiobrás and TVE (Televisão Educativa).

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