The Brazilian economy grows in the first quarter and returns to its pre-pandemic level

Rio de Janeiro, June 1 (EFE). The Brazilian economy grew by 1.2% in the first quarter of 2021 compared to the fourth quarter of 2020, after experiencing a 4.1% contraction last year, its worst result in 25 years, and it returned to the level it was at the end of 2019 before it was affected by the covid-19 epidemic.

The gross domestic product (GDP) growth of South America’s largest economy in the first three months of this year, which the government disclosed on Tuesday, exceeded economists’ expectations and surprised as it did not feel the effects of a decline in consumption, rising unemployment and new social distancing measures to curb the pandemic.

According to data from the state-owned Brazilian Institute of Geography and Statistics (IBGE), after a historic contraction of 9.2% in the second quarter of 2020, the hardest hit by the epidemic, the Brazilian economy imposed three successive periods of expansion: 7.8% in the third quarter, 3.2% in the fourth and 1.2% in the first three months of this year.

This recovery, despite the slowdown in the growth rate, has allowed Brazilian GDP to return to the level it was in the fourth quarter of 2019, that is, to the level it was before the pandemic, according to the IBGE.

Brazilian Infrastructure Minister Tarcisio Freitas celebrated, “The growth in the first quarter puts us at a pre-pandemic level and shows that Brazil will end the year with record growth.”

The result reinforces expectations, by the government, economists and organizations such as the Organization for Economic Co-operation and Development, that Brazil will end 2021 with economic growth close to 4.0% and will outpace losses from the pandemic.

If these expectations are met, Brazil will be able to resume its economic recovery after the historical recession it suffered in 2015 and 2016. Brazilian GDP has been growing slowly (1.3% in 2017, 1.8% in 2018 and 1.4% in 2019) after strong contractions in 2015 (-3.5%) and 2016 (-3.3%).

The growth in the first quarter surprised economists, who initially feared a negative outcome due to the worsening epidemic in Brazil with the arrival of the second wave in February and new restrictive measures adopted by regional governments.

The coordinator of the national accounts studies explained that “even with the second wave of the epidemic, the economy has grown in the first months of the year since, unlike 2020, there were not many restrictions that prevented the operation of economic activities.” IBGE, Rebecca Balles.

The first-quarter result was also surprising because it occurred in the midst of record unemployment (14.7% of the active population) and the suspension, at least in the first months of this year, of the subsidies the government distributed in 2020 to help the poor mitigate the effects of the pandemic.

Unemployment, aid cuts and rising inflation caused household consumption, the main driver of a country of 210 million people, to fall 0.1% in the first quarter compared to the last three months of 2020 and 1.7% compared to the first three months. months last year.

While household consumption, responsible for 60% of Brazil’s demand-adjusted GDP, experienced a 0.1% drop, the service sector, responsible for 70% of Brazil’s supply-adjusted GDP, grew by only 0.4%.

With these two important indicators weak, growth in Brazil in the first quarter ended up being driven by agriculture, whose output jumped 5.7%, and investment and exports, underpinned by rising global demand and rising crude prices. Materials.

According to IBGE, gross fixed capital formation (productive investment) rose 17.0% in the first quarter, its highest rate since the second quarter of 2010.

Brazil’s investment rate in the first quarter was 19.4% of GDP, above the first three months of last year (15.9%).

Despite the strong recovery in the first quarter, economists warn that the growth of the Brazilian economy for the remainder of the year will depend on progress in controlling the epidemic and the acceleration of the vaccination campaign, which is still underway at a slow pace. EFE

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