‘Stagnation for 2022 seems to have been contracted,’ says Armando Castelar

For Armando Castelar, coordinator of applied economics at Ibre/FGV (Brazilian Institute of Economics, Fundação Getulio Vargas), the 0.1% retraction in Brazil’s GDP (Gross Domestic Product) in the third quarter reinforces the stagnation scenario, which contaminates expectations for the coming year.

According to him, the economy returned to the point before the pandemic, but did not advance after that.

How to evaluate the result of the third quarter? Without a doubt it is a stagnation, we had two consecutive quarters without growth. The drops are small, but the sign is negative. The negative in the third quarter came from agriculture and livestock and the impacts of the lack of rain on energy generation. The immunization worked, services grew and there was some recovery in employment. In this sense, the ‘V’ recovery [prometida pelo ministro da Economia, Paulo Guedes] it even happened, but we’re back to the point before the pandemic and we can’t get out of it.

Are we dealing with a stagnant economy for two quarters? In a way, we even regressed. The discussion that needs to be done today is what are the reasons that made us stop. Vaccination helps and we are still going to have more positive impacts from it on the economy, but it was expected that some sectors would grow more with vaccination. It is also necessary to remember that the second quarter was the second wave, it was a depressed base and that it created expectations for a stronger recovery now.

Looking ahead, what holds the recovery of economy? It’s inflation, which is eating away at people’s income. The shortage of inputs also continues to harm the industry — and it was previously thought that this would be resolved more quickly. More expensive energy also affects people’s lives and companies’ performance, and rising interest rates inhibit the construction sector.

The trend is for us to take this stagnation to 2022, with some recovery, but this is the trend. The stagnation for next year seems to be contracted.

What could be done to avoid this mediocre growth scenario? Part of the growth must come from a recovery that still needs to happen with the return of the presence of the public administration and the reopening of other services. The rest is more complicated.

The industry still suffers a lot from what happens out there, with the new variant. Farming tends to have a good year next year, but that depends on the weather. Confidence is low due to the uncertainty of what will happen in 2023, there are many doubts about fiscal policy and what kind of economic model will be used after the election. The stagnation in 2022 has a lot to do with it.

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Armando Castelar Pinheiro, 66

Coordinator of applied economics at Ibre/FGV, he was an analyst at Gávea Investimento, a researcher at IPEA and head of the BNDES’ Economic Department; He holds a PhD in economics from the University of California, Berkeley, a master’s degree in administration from Coppead/UFRJ and in statistics from Impa (Institute of Pure and Applied Mathematics) and an electronic engineer from ITA (Instituto Tecnológico de Aeronáutica).