The Brazilian report: the impacts of the Coronavirus on the Brazilian economy

Aug 4, 2020

The Brazilian Report, given the global pandemic that occurs today, we know that the world economy has been strongly influenced. Governments are anxious to stop the containment and shutdown of their economies due to the health crisis. But many leaders fear that a return to activity will lead to a new wave of contagion. In Brazil, the picture is no different, considered the new world epicentre of Covid-19, below you find economic news of Brazil.

The economic impacts of the Covid-19 pandemic were considerable than expected at the start of the epidemic. Companies shut down, and hundreds of millions of people around the world have been told to stay home to prevent the spread of the coronavirus pandemic as scientists scramble to develop treatments and a vaccine. The UN report states that the pandemic showed that public health and the economy “are inextricably linked and mutually strengthened.” With more than 2.5 million people infected and more than 190,000 dead, and no proven treatment insight, social isolation was the strategy adopted by most countries to fight the virus, which in turn caused economic activity to stop.

Brazil’s economic indicators plummeted as the pandemic advanced and strengthened. If we look at the data on credit card spending,   trade and construction, we see a contraction of 20 to 15%, if we continue in this way, we have the possibility of a double-digit fall in GDP in the second quarter of 2020. However, this depends on how quickly economic activity resumes after social distancing.

In Brazil, the Ministry of Economy revised the projection of Brazilian GDP in 2020 from 2.4% to 2.1%, according to their Macro-Fiscal Bulletin Macro and, published by the Economic Policy Secretary. The economic team of Paulo Guedes, Brazilian Economy Minister, attributed the revision of gross domestic product to the impacts that the spread of coronavirus can cause on the world economy and, therefore, in the country. The consequences of such a massive fall in GDP are substantial. The main impact is related to the unemployment rate, which can reach about 15.5% by the end of the year.  Due to the fall in formal and informal salaries and considering the government-provided emergency aid of 600.00 reais, we can consider an immediate impact on consumption of 8.5% and, taking in consideration an intermediate recovery in the following quarters, the total decrease for the year will be close to 5%.

The Brazilian Report: Positives aspects

According to the economic department of Banco Bradesco “A positive aspect” of this crisis is the prospect of inflation. IPCA consumer inflation is expected to be very low in 2020 and 2021, remaining at or slightly below the inflation target. IPCA inflation expected to be 2.2% in 2020 and 3.0% in 2021. The depreciation of the Brazilian currency was more than offset by falling commodity prices and the effects of the economic crisis. The difference in production suggests a wide gap in the coming quarters, keeping the prices of goods and services stable. In this sense, inflation will not prevent monetary easing. ”

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