2021 has been an erratic year, starting with hoping the worst was behind us, and ignoring the second wave of contagion between February and March. In the middle of the year, there seemed to be no bad weather for economic activity. The government boasted and the economic recovery was a quick daydream.
The third quarter was already marked by uncertainties, whether in the international scenario with the arrival of another variant (the delta), or because of the “balances but does not fall” in China with the case of the real estate company, Evergrande, or because of fiscal conditions places that exposed the country’s mismanagement. You see, a good economic performance depends largely on the agents’ trust, after all, the decisions to invest, hire, take credit or consume are closely linked to how comfortable we are with the economic situation. And that’s the point: our economic situation has been hurt over and over again, not only by the pandemic, but mainly by local decisions, with emphasis on the wrong speeches and disaffection by the Brazilian authorities.
The conclusion can be seen in numbers. This Thursday (2), the IBGE released the GDP for the third quarter, which, given the table described above, presented a slight drop of -0.1% compared to the second quarter, with a drop in important segments, such as agriculture, and stability of the industry. On the demand side, the worst performance came precisely from the item that we lack the most: investments. What’s more, the IBGE also brought a downward revision of the second quarter’s data (showing a drop of 0.4% compared to the previous quarter), suggesting that, in the year so far “bombed” by the eyes of some government officials, we had a technical recession ! Just remembering, technical recession occurs when we have two consecutive quarters of GDP retraction.
Not only to bring unpleasant news, GDP also showed a positive face, coming from services, also motivated by household consumption. I believe that this movement is due to our current expansionary fiscal policy, which by the way has maintained double-digit inflation. In other words, even what can be good is not so much. After all, this movement suggests even more increases in interest rates, which in turn undermines the economic recovery to follow.
Looking ahead, the worst scenario should continue to weigh on confidence. For while we were monothematic in pandemics for almost two years, in 2022, we will be monothematic in elections. Everything will be around the decision of the polls in October. It is impossible to guess what will happen, who will win, but we know that the presidential elections themselves, historically, generate a lot of uncertainty. Uncertainty tends to freeze economic growth, even more so in a tight monetary cycle.
Additionally, the current president’s popularity isn’t so good anymore. Considering his profile, and the fact that he now faces a rejection of around 60%, it is quite feasible to wait for populist measures to get re-elected in a fragile fiscal environment.
Finally, in electoral years, Congress focuses its energies on articulations and votes (read: no room for reforms). So these are years with more modest growth. This combination pushes expectations of economic growth even further down (or would it generate more force for economic recession?).
With this, the growth to be seen in the accumulated result for 2021 should represent just another chicken flight in Brazilian history.
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
