PIBinho with the face of PIBão: 5 points to understand the pace of economic recovery | economy

Economists heard by G1 They note that the economy is already showing signs of slowing down in the fourth quarter and estimate that GDP should only return to the pre-pandemic level after 2022. In other words, the economy is still far from ‘cured’, and it will take time to get back to where it was before the impact that the coronavirus brought.

• GDP: understand what it is and how it is calculated

The Minister of Economy, Paulo Guedes, has reaffirmed that the indicators point to a resumption of “V” growth, a sharp drop followed by an equally strong recovery. The data published on Thursday (3) seem to point in that direction, showing that the% growth in the third quarter was the highest rate ever recorded since the IBGE began calculating quarterly GDP in 1996. Until then, the El The greatest advance occurred in the third quarter of 1996 (3.8%).

However, the figures can give a misleading impression about the state of the Brazilian economy., which was hit by the pandemic even before recovering from the losses of the last recession, 2014-2016.

In this sense, the 7.7% increase in the 3rd quarter should be seen as a kind of echo or rebound from the record and unprecedented contraction recorded in the 2nd quarter, and not as a thermometer of the vitality or vigor of the Brazilian GDP.

See below 6 points that help to understand the result of the GDP of the 3rd quarter, the still fragile recovery of the Brazilian economy:

If GDP fell 9.7% in the second quarter and grew by one% in the third quarter, it may seem that the economy is back for good and has come out of the hole. But this record quarterly growth is just the statistical effect of a much smaller base of comparison.

The fact is that the economy has only partially recovered and has not yet managed to return to the point it was at at the end of the first quarter, when the first impacts of the pandemic began to be felt.

“The point is that the basis of comparison is horrible, basically we have a dramatic drop in the second quarter and this third quarter is really just an effect of relieving isolation, resuming activities. And it will take some time for people to get back to business. pre-pandemic level, at the end of 2019 ”, says Alessandra Ribeiro, director of the macroeconomics and sector analysis area of ​​Trends Consultoria Integrada.

A simple example to understand this statistical effect is the following: if you have R $ 100 and lose 50%, you keep R $ 50. But if you later increase your money by 50%, you have R $ 75 and not R $ 100 That is why a quarterly increase in the same proportion as the rate of decline in the previous quarter does not mean a return to the starting point.

The still incomplete recovery is more evident in the GDP result in relation to the 3rd quarter of 2019: on this basis of comparison, there was a decrease X%.

It should be remembered that the current market estimate is a 4.5% drop in GDP in 2020. Even with the improvement in forecasts in recent weeks, the result for the year should be the worst recorded in the country. According to the IBGE historical series, which began in 1948, the greatest falls to date were those of 1981 and 1990, when there was a 4.3% retraction in both years.

2. Uneven recovery

While the performance of industry and commerce was surprising in the third quarter, with both eliminating losses from the most acute period of the pandemic, the recovery of the economy remains uneven, with the service sector struggling to return to normal. , mainly activities. which are based on the mobility of people and presuppose some level of agglomeration such as tourism, accommodation, leisure and food outside the home.

The slower recovery of services slows down the economy as a whole, since it is the sector with the greatest weight in GDP, around 75%.

“Trade is doing well, the manufacturing industry has been surprising month after month and also construction. The biggest problem is in services, especially other services, which include those provided to families. In September, they were still 36% below February “, says Luana Miranda, economist at Ibre / FGV.

Alessandra points out that industry and commerce already show a recovery in “V”, but the service sector should only grow again next year, as well as household consumption, commercial investments and public spending.

“Those segments that were recovered will grow again in 2021. But it is still a gradual recovery, so all the production of goods and services only really returned to the level of the end of 2019 at the beginning of 2022”, he estimates.

3. Deceleration trend

The strong recovery in the third quarter was mainly due to for robust government money transfers. Government spending to combat the effects of the pandemic has already reached R $ 587.5 billion, and the total amount of the fiscal stimulus is around 8% of GDP, above the amount disbursed by other emerging countries.

Emergency Aid guaranteed support to a total of 67.7 million people, but the reduction in the amount of aid to families from R $ 600 to R $ 300 is already beginning to impact the level of consumption of this segment of the population.

“You can’t talk about a ‘V’ recovery just with that number in the third quarter. It is still a very fragile recovery. We need to keep up with developments in other sectors of the economy, which we will see in the fourth quarter, that it should slow down a lot, and the end-of-year risk of this eventual return of Covid, ”says MB Associados chief economist Sergio Vale, who estimates GDP growth below 1% in the 4th quarter.

According to Alessandra of Tendencies, Emergency Aid contributed significantly to the increased consumption that drove growth in the third quarter. On the other hand, for the purpose of this benefit, there will be what she calls the “reverse of the medal” in 2021.

Leading indicators already show a slowdown in economic activity in October due to the reduction in the value of emergency aid.

“In the mass of expanded income, in which we consider the mass of income from work and other sources, such as government transfers, social security and other sources of income, this calculation shows that there was an increase of 4.5%. Then when you withdraw the aid, there is a 4.2% drop. So it is a strong blow, and this will be especially felt by the low-income segment that received the most, the informal, with low qualifications, so there will be a strong return on this profit, ”he explains.

“The big question is how the Brazilian economy will function and how it will react to the exit of this aid. In the 4th quarter we should already see a slowdown and it should last at least the first half of 2021 ”, assesses Miranda.

Ibre / FGV projects a 5% drop in GDP in 2020 and a 3.5% growth in 2021, with a return to the pre-pandemic level only in 2022.

For Alessandra, recovery was already slow before the pandemic. “At the beginning of the year there were already some signs of loss of dynamism. And then came the pandemic. So we went slow and the beat came. But the point is that for us to recover what we produced at the end of 2019, which is not surprising, it will take a little time. ”

4. Rise in unemployment and fall in income

The prospect of ending the stimulus programs should imply a reduction in the potential consumption of families, since unemployment is at a record level and the number of Brazilians employed with some income has never been less.

“The unemployment rate should reach 17% in the coming months. In a scenario of great uncertainty, it is difficult to imagine that families will return to consumption with intensity and vigorous growth,” Vale evaluates.

Alessandra predicts that the unemployment rate will hover around 16%, driven mainly by the unemployed who were not looking for work during the pandemic. “As much as the economy generates employment, it will not be able to absorb all this contingent. Then the unemployment rate will increase. This is also a limiting factor for the growth of the economy,” he says.

According to the economist, the person who suffers the most from unemployment is the least qualified worker, with the lowest average salary and in the service sector. “We had a big hit, a loss of 12 million jobs, it is no small thing, and much of it is informal.”

The rebound in the prices of items such as food and the fall in household income also influence the prospects for the pace of recovery. IBGE data show that the mass of the total income of workers contracted 5.7% (less R $ 12.3 billion) in the quarter ended in August, compared to the same period last year.

There are also doubts about the impact of the termination of the program, which allowed a reduction in working hours and wages and guaranteed the employment of almost 10 million workers.

“How will the situation of the companies be? Will they be able to keep the staff even with the exit of these programs? This is an issue that should also be on the minds of consumers, ”says Miranda.

5. Greater uncertainty

In addition to doubts about the evolution of the pandemic and the risk of a second wave of contamination, concerns about the health of public accounts and the advancement of the structural reform agenda in Congress have also weighed on the country’s prospects.

The explosion of public debt, which is close to 100% of GDP, doubts about respecting the spending ceiling (a rule that does not allow spending to exceed the inflation of the previous year) and the risk of uncontrolled fiscal conditions, uncertainties about the rate of economic recovery in 2021 and 2022.

“The central issue is the uncertainty that is being created with the fiscal situation, with direct complications in consumption and investments. For the investor, this fiscal risk can mean a higher interest curve, higher inflation and a more unstable situation in the economy. Then it will wait, because the idle capacity is still very large, ”explains Vale.

MB Associados projects a growth of 2.2% of GDP in 2021, below the market average, currently at 3.31%, and also foresees obstacles for 2022.

“2022 is going to be an election year, so it will also be very tense. The pandemic was a fiscal shock of such magnitude that it would require a credibility shock and action by the government that so far has not been able to demonstrate the necessary reforms,” says Vale.

Alessandra Ribeiro affirms that the trajectory of public debt is already very complicated, maintaining the spending ceiling and, if there are changes in the rules to accommodate more expenses, a more pessimistic scenario for the country could be entered.

“The longer we take to solve these problems, the higher the level of uncertainty, the more the market gets nervous, future interest rates begin to rise, exchange rates depreciate, the stock market falls, and this affects economic activity, the predisposition to invest and consume, so that we can have a more adverse scenario ”, he says.

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