Brazil’s GDP grows 7.7% in the third quarter, but does not eliminate losses from the pandemic | economy

The expansion of the economy was record in the third quarter, but still insufficient to recover the losses recorded at the peak of the coronavirus pandemic in the country. In current values, the GDP for the third quarter totaled R $ 1,891 billion.

“The Gross Domestic Product (GDP) grew 7.7% in the third quarter, compared to the second quarter, the highest variation since the beginning of the series in 1996, but still insufficient to recover the losses caused by the pandemic. the result, the The country’s economy is at the same level as 2017, with a cumulative loss of 5% from January to September, compared to the same period in 2019, ”the IBGE reported.

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As a result, the economy reversed part of the losses from the pandemic, but the the increase was insufficient to offset the collapse of GDP in the 1st quarter (-1.5%) and in the 2nd quarter (-9.6%), which plunged the country into a new crisis and caused record unemployment.

The 7.7% growth in the third quarter was the highest recorded since IBGE began calculating quarterly GDP in 1996. Until then, the highest rate had been recorded in the third quarter of 1996 (4.3%) .

The strong advance between the months of July and September is directly related to the weaker comparison base, due to the historic drop recorded between April and June, which was revised to a 9.6% drop, compared to the initial reading of a 9.7% drop.

The consequences of the pandemic are also clear in the annual comparison. In relation to the 3rd quarter of 2019, the GDP registered a fall of 3.9%, the third retraction followed on that basis of comparison.

In the accumulated of the four quarters ended in September, there was a decrease of 3.4% compared to the four immediately previous quarters.

GDP is the sum of all goods and services produced in the country and is used to measure the evolution of the economy. Two consecutive quarters of a drop in the level of activity (registered in the 1st and 2nd quarters of this year) represent a technical recession, which was overcome according to IBGE figures.

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The GDP figures came out weaker than expected. THE the market expectation was a growth of 8.8% compared to the previous quarter, according to the median of the estimates made by Valor Econômico with consulting firms and financial institutions.

Main highlights of the GDP of the 3rd quarter

• Agriculture: -0.5%
• Industry: 14.8%
• Extractive industry: 2.5%
• Manufacturing industry: 23.7%
• Civil construction: 5.6%
• Services: 6.3%
• Trade: 15.9%
• Household consumption: 7.6%
• Government consumption: 3.5%
• Investments: 11%
• Export: -2.1%
• Import: -9.6%

“There was a recovery in the third versus the second quarter, but, if we look at the interannual rate, the fall is 3.9% and in the accumulated result of the year we continue to fall, both industry and services. Agriculture is the only one that grows during the year, strongly driven by soybeans, which is our largest crop ”, highlighted the coordinator of IBGE National Accounts, Rebeca Palis.

In the accumulated result of the year until the third quarter, GDP fell 5% compared to the same period of the previous year. In this comparison, agriculture grew by 2.4%, while industry (-5.1%) and services (-5.3%) continued to fall.

Manufacturing and commerce are highlights; agriculture falls

A The transformation industry was the highlight of the 3rd quarter, managing to return to the level of the first quarter, with a growth of 23.7% after falling 19.1% in the second quarter.

OR trade also showed a strong recovery, growing by 15.9%, reversing the 13.7% drop no previous quarter.

The services sector, which has the greatest weight in the economy, is the one that showed the slowest recovery, with an increase of 6.3% after falling 9.4% in the second quarter.

“Even though operating restrictions have been removed, people are still afraid to consume, especially the services provided to families, such as accommodation, food, cinemas, gyms and beauty salons,” said Rebeca.

Agriculture was the only sector, on the supply side, that showed a fall of 0.5%, in relation to the previous three months. According to IBGE, the fall was due to an adjustment in crops, but the sector still registered growth in the year.

“Agriculture is a separate case. It continues to grow at a year-on-year rate. Compared to the first quarter of this year, it fell due to the seasonality of the harvest of products, especially soybeans,” said Rebeca.

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The strong reaction of GDP in the third quarter was mainly supported by significant public spending on aid and income transfer measures. The recovery, however, was marked by heterogeneity, with several segments still facing difficulties to return to normal, especially activities in the services sector.

The result is similar to that observed in other countries that also had their economies strongly affected by the pandemic. In the countries that are part of the Organization for Economic Cooperation and Development (OECD), the increase was 9% in the third quarter.

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Although the Minister of Economy, Paulo Guedes, has been reaffirming that the indicators point to a resumption of growth in “V” – a sharp drop followed by an equally strong recovery – the economy is still far from being “cured” and the outlook is loss. pace since the fourth quarter, with the reduction and termination of the stimulus measures.

“The peak of the economy, the highest point of GDP, was registered in 2014. Now we are 7.3% below it,” said the research coordinator, explaining that in the 2nd quarter GDP was 14% below this peak. “In relation to the 4th quarter of last year, we are 4.1% down.”

The researcher recalled that the Brazilian economy was hit by the impact of the pandemic at a time when it was still recovering from the losses with the recession of 2015 and 2016.

“GDP grew until 2014, fell in 2015 and 2016 and began to recover in 2017. At the end of 2019 we were already at a level equivalent to that of 2012. With the pandemic, we went back to 2009 and now we are walking a little more and we we went at the end of 2010, which is equivalent to what we observed in 2017, ”he said.

Household consumption grows below the level of GDP

From the spending perspective, household consumption – the main driver of the economy for years and with a 65% share of GDP – expanded by 7.6%, slightly below the result of GDP, eliminating only one part of the fall of 11, 3% in the second quarter. In other words, families did not return to consumption to the pre-pandemic level.

The crisis in the labor market is one of the main limitations to the resumption of consumption by families, according to Rebeca. However, she considered that she was compensated with emergency aid offered by the government.

“We cannot make a separate calculation of the impact of this aid, but clearly, we can see that it contributed [com o consumo] when we look at, for example, the growth of trade, ”he said.

the Investments (Gross Formation of Fixed Capital) grew 11%, after falling 16.5% in the previous quarter. So far this year, the fall is 5.5%. The investment rate as a percentage of GDP was 16.2% of GDP compared to 16.3% in the same period of the previous year. In 2013 it exceeded 21%.

“Investments fell, all components of it, both the construction part, thrown away by infrastructure, and the production and import of capital goods,” said Rebeca Palis.

In relation to the external sector, exports of goods and services fell 2.1%, while imports fell 9.6% in relation to the second quarter, in results also influenced by the exchange rate.

IBGE revises the 2019 GDP for a greater increase, of 1.4%

IBGE also revised the 2019 GDP growth result, from 1.1% to 1.4%. The institute always conducts a more complete review of the historical series in the third quarter disclosure of each year.

The financial market began to project a 4.50% retraction of Brazil’s GDP this year. Even with a smaller retraction than initially imagined, the 2020 result should be the worst on record 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.

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For 2021, the current forecast is for GDP growth of 3.45%. According to analysts, maintaining the current scenario, Brazil should only resume the pre-pandemic level from 2022.

The OECD estimates a lower growth of the Brazilian economy in 2021, of 2.6%, below the projection for the global average, of 4.2%. The International Monetary Fund (IMF), for its part, projects an increase of 2.8%, but warned this week that a “robust and inclusive recovery” depends on the progress of structural reforms “and on the sustainability of public debt.

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