Brazil’s GDP plummets 4.1% in 2020 | Economy

It was the largest contraction since the beginning of the current IBGE historical series, which began in 1996, exceeding the 3.5% drop recorded in 2015.

“It is the largest annual drop in the series that began in 1996. This drop interrupted the growth of three years in a row, from 2017 to 2019, when GDP accumulated an increase of 4.6%,” reported IBGE.

In current values, the Brazilian Gross Domestic Product (GDP) reached R $ 7.4 trillion. the The GDP per capita (per inhabitant) in 2020 was R $ 35,172, 4.8% less, the highest registered in 25 years..

Considering the previous historical series, which began in 1948, the 4.1% drop in 2020 was the highest in 30 years. The largest retractions ever recorded in the country occurred in 1981 and 1990, when there was a 4.3% drop in GDP in both years.

GDP is the sum of all goods and services produced in the country and is used to measure the evolution of the economy.

Top GDP Highlights in 2020:

• Services: -4.5%
• Industry: -3.5%
• Agriculture: 2%
• Household consumption: -5.5%
• Government consumption: -4.7%
• Investments: -0.8%
• Export: -1.8%
• Import: -10.0%
• Civil construction: -7%

Among the main sectors, there was an increase only in Agriculture (2%), while Industry (-3.5%) and Services (-4.5%) decreased. On the demand side, the household consumption plummeted 5.5% and investments contracted 0.8%.

“The result is an effect of the Covid-19 pandemic, when several economic activities were partially or totally paralyzed to control the spread of the virus. Even when social distancing became more flexible, many people continued to fear using, especially services that can cause overcrowding, ”said the coordinator of National Accounts, Rebeca Palis.

The economy remains at the same level as in early 2019

The contraction of GDP in 2020 interrupted a 3-year sequence of timid economic growth and occurred before the country managed to recover from the losses of the previous recession, of the years 2015-2016.

Although it registered two consecutive quarters of highs, the country closed 2020 with the economy 1.2% of the level it had in the fourth quarter of 2019.

According to IBGE, the Brazilian economy closed 2020 at a similar level to that found between the end of 2018 and the beginning of 2019, 4.4% below the highest point of the country’s economic activity, reached in the 1st quarter of 2014.

“We did not go back to the pre-pandemic level. But, at the same time, compared to the worst moment of the pandemic, which was in the second quarter of 2020, we recovered 10.4%, ”said Rebeca Palis.

Services was the most affected sector

The services sector, which represents around 70% of GDP, was the most affected by the pandemic and the restrictive measures. Among the subcomponents, the biggest drop was in “other service activities” (-12.1%), a category that includes restaurants, gyms, hotels.

“Services provided to families were the most affected by the operating restrictions. The second largest drop occurred in transport, storage and mail (-9.2%), mainly passenger transport, an economic activity that was also highly affected by the pandemic ”, highlighted Rebeca.

The only service categories that grew in 2020 were financial, insurance and related services (4.0%) and real estate activities (2.5%).

In industry, the worst performance was that of civil construction (-7%), which fell again after the increase of 1.5% in 2019. The transformation industries (-4.3%), and the activities of electricity and gas, water, sewerage, waste management (-0.4%). On the other hand, the extractive industries increased by 1.3%, due to the increase in oil and gas production, which offset the fall in the extraction of iron ore.

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Household consumption has a historical drop

According to IBGE, household consumption registered the largest drop ever recorded in the historical series (-5.5%), mainly explained by the deterioration of the labor market and the need for social distancing.

The fall in government consumption was also record (-4.7%), and can be illustrated with the closure of schools, universities, museums and parks throughout the year.

Investments (Gross Fixed Capital Formation) fell 0.8%, interrupting a sequence of two positive years, and the fall in 2020 was not only greater, according to IBGE, because they were benefited by Repetro, which ended in December and authorized companies in the extractive industry. to include in its assets as capital goods what used to be exports.

The investment rate in 2020 was 16.4% of GDP, above that observed in 2019 (15.4%), but still far from the peak of 2013, when it exceeded 21%. The savings rate was 15% compared to 12.5% ​​in 2019.

The recovery slowed down in the 4th quarter

In the fourth quarter of 2020, GDP advanced 3.2% compared to the third quarter of last year (7.7%), after the 2.1% drop in the first quarter and the record 9.2% drop in the second quarter. Despite the slowdown in the pace of recovery, it was the second positive quarterly result in this comparison.

In the transition from the third to the fourth quarter, industry and services increased 1.9% and 2.7%, respectively, while agriculture and livestock decreased 0.5%. From an expenditure perspective, household consumption and government consumption grew by 3.4% and 1.1%, respectively, while investments increased by 20%.

Compared to the last 3 months of 2019, GDP fell 1.1% in the fourth quarter.

“This slowdown is expected because we grew at a very high base, in the third quarter, after a very deep setback at the height of the pandemic,” explained Rebeca Palis.

IBGE reviewed the GDP result for the first two quarters of the year. In the first, compared to the fourth quarter of 2019, the fall was 2.1%, more intense than previously disclosed (-1.5%). In the second quarter, the drop was 9.2% compared to the first and not 9.6% as previously reported.

Outlook and uncertainties

Economists have warned of slowing economic activity with the end of aid programs without defined substitutes and increasing uncertainty amid the still dire situation of the pandemic, “saltier” inflation, high unemployment and the persistent concern about the trajectory of the public debt – the so-called fiscal risk.

Analysts heard by G1 They estimate that a resumption in 2021 continues to depend on the mass vaccination of the population and the control of the pandemic, which has already left more than 257 thousand dead in Brazil and has reached its worst moment in the country in recent days.

The average market projections for the growth of the Brazilian economy in 2021 is currently at 3.29%, according to the latest Focus survey from the Central Bank. Economists are already working, however, with the expectation of a retraction in the 1st quarter and part of the market does not rule out the risk of a fall in GDP also in the 2nd quarter, which would constitute a new technical recession.

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