Brazil must complete 16 years of growth below the world average

The Brazilian economy is expected to complete at least 16 years of growth below the world average, a period that began during the Dilma Rousseff administration and may extend until the end of the next presidential term.

This is shown by a survey with data and projections from the IMF (International Monetary Fund) and from the Focus survey by the Central Bank carried out at the request of the leaf and that complements a study by economists Marcel Grillo Balassiano and Samuel Pessôa published by FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation).

Since 2011, the country has been experiencing a combination of periods of recession, stagnation and low growth, with numbers far from what is seen at the global level. Also noteworthy in the period were government actions to dismantle spending control policies, with effects on the exchange rate and inflation, problems that are also currently experienced.

The Brazilian GDP (Gross Domestic Product) grew 1.4 percentage points below the global average since 1987, the period studied by the researchers. On average, the country grew 2% a year, while the world advanced at a pace of 3.4%.

This gap was reversed in just a few years of the Itamar Franco, FHC and Lula administrations. Considering the average over the eight years of each administration, Brazil grew below the world pace even in the governments of the Toucan and PT.

In the current government, the difference should be negative by 2 percentage points. Although the pandemic has affected all economies, Brazil had a retraction greater than the global average in 2020 and is expected to grow less than the world in 2021 and 2022.

The difference in the current administration will only be surpassed by that of the Dilma-Temer period (2011-2018), when GDP grew 2.9 points per year, on average, below the world result. In the next government (2023-2026), the difference should return to an average of 1.4 points a year, as long as Brazil manages to resume the growth rate of around 2% a year.

The two economists also developed a model to estimate what the growth of one of the main indicators of population wealth, GDP per capita, should have been, based on various economic indices that showed, for example, the favorable winds of the global economy and fundamentals. household appliances.

The study “Performance of the Brazilian Economy in the Last Eight Quadrenniums (1987-2018)” shows that the indicator grew from 2011 below the indicated trend, something that had not happened since the implementation of the Real Plan, with a situation that worsened in the recession of 2014-2016.

To reach the result, two economic models were built with different indicators, also tested with data from 37 and 67 countries, respectively, for these 32 years. The model is able to explain the indicator results for this sample of countries most of the time, with few exceptions. One of them is in the period that goes from the end of the crisis of 2008/2009 until the recession of 2014-2016.

From 2011 to 2018, for example, GDP per capita in dollars, considering the concept of parity power, should have grown by 0.8% per year, but registered an annual retraction of 0.2%. In other words, indicators such as world GDP, variation in terms of trade —a rise or fall in the prices of Brazilian exports in relation to imports—, interest difference with the US, real interest rates and government investment and consumption rates indicated a positive trend, according to the model.

According to economists, one of the main debates in the Brazilian economy was about the reasons for the slowdown in Brazilian growth since then, with a (smaller) part of the analysts attributing the result mainly to external factors or factors beyond the government’s control.

Among them, the end of the commodity boom of the previous decade, which would have worsened the terms of trade (this factor was considered in the Pessôa and Balassiano model), Operation Lava Jato, political crises and water problems in the middle of the last decade.

“Another part (majority) interpreted that internal factors were the main reasons, above all related to the so-called ‘New Economic Matrix'”, says the study.

The “New Matrix” of the PT government intended to replace the tripod formed by inflation targets, primary surplus of public accounts and floating exchange rate for a more interventionist economic policy.

For them, there was a detachment between the Brazilian economy and the world economy in the 2015-2016 biennium and a “gap” between what the models indicated should have happened and what actually happened.

This difference was not found in other periods estimated by the models, “reinforcing the view that the weakness of economic activity was largely the result of specific factors in our economy, and not external factors”, say the authors.

These issues were also highlighted in other works by Samuel Pessôa, who is a researcher at Ibre and a columnist at leaf, and Marcel Balassiano, currently Undersecretary of Economic Development and Innovation of the Rio de Janeiro City Hall and licensed researcher at Ibre. The study was prepared before the economist took public office.

Pessôa says that the model works surprisingly well to explain growth most of the time in these 37 countries, but it cannot explain what happened from 2009 on in Brazil.

“My interpretation is that we had been testing the limits of the capacity for growth already in Lula’s second term. And we continued to do this with greater intensity in the first years of the Dilma government”, says the researcher.

“You tried to take a step bigger than your legs, you forced the system to grow beyond what it could, you built imbalances. The crisis is the result of these imbalances.”

As the model considers periods of eight years and data already verified, calculations were not performed for the trend of GDP per capita in dollars from 2019. Data from the IBGE (Brazilian Institute of Geography and Statistics) and market projections show that the indicator in reais is expected to remain below the 2013 peak in the coming years.