Brazil’s GDP declines 4.1 percent amid COVID pandemic

Brazil: Brazil’s economy shortened last year by 4.1 percent during the pandemic, data showed on Wednesday, worst drop in decades, but not as much as initially expected due to money transfers to the poor.

According to official statistics agency IBGE, Latin America’s largest economy grew by 3.2 percent in the fourth quarter, more than the 2.8 percent median approximation in a Reuters poll of economists.

“People expected us to fall 10 percent,” said President Jair Bolsonaro, who has played down the gravity of the pandemic & opposed lockdowns.

“What made the economy move, in part, was the emergency help,” he told reporters, figuring that his government has done everything possible to keep the economy running.

Still, the second wave of coronavirus has killed Brazilians in record numbers in recent weeks, clouding the economic outlook and adding to fears of a renewed downturn early this year.

The full-year 2020 drop was the worst for the current IBGE series began in 1996. The 2020 plunge was also the worst since a 4.35 percent fall in GDP recorded in 1990, as per the central bank data going back to 1962, and the third-steepest in that series.

Among the gloomiest forecasts at the onset of the pandemic, the World Bank and International Monetary Fund estimated that Brazil’s 2020 GDP would shrink by 8 percent and 9.1 percent, respectively.

The 3.2 percent expansion in the fourth quarter was led by 2.7 percent growth in services, 3.4 percent expansion in household consumption, and a 20 percent surge in fixed business investment, IBGE said.

“We had a big fall [in activity] last year, but with the emergency aid, it was much smaller than originally predicted. It could have been much worse … but the public finances are now very fragile,” said Alexandre Almeida, an economist at CM Capital in Sao Paulo.

The government’s cash transfers to millions of low-income families last year totalled some 322 billion reais ($56.5bn), a fiscal boost of around 4.5 percent of GDP.

Mexico, which did not provide anywhere near as generous a fiscal support package, saw its economy slump 8.5 percent last year.

However, during the course of the year, only Brazilian agriculture showed positive growth, up 2 percent from 2019. Services & household consumption fell 4.5 percent and 5.5 percent, respectively, due to coronavirus and restrictions to fight its expanse.

GDP per capita fell 4.8 percent, IBGE stated, the steepest drop since at least 2000.

IBGE figures show economic activity is still 1.2 percent below its level at the end of 2019 and 4.4 percent below its peak in 2014.