Amid the advance of the omicron, the Economy maintains cautious optimism with the GDP

With the rampant advance of the omicron variant of the coronavirus in Brazil, the forecasts for the economy have become more muddy, although the Ministry of Economy remains cautiously optimistic in comparison with market agents, according to sources from the ministry heard by Reuters.

Internal calculations are still for a rise in GDP (Gross Domestic Product) of 2.1% this year, contrary to decreasing market estimates, whose median today points to a growth of only 0.29%, according to the most recent bulletin. Focus, while banks like Citi, Credit Suisse and Itaú Unibanco already project a contraction in activity in 2022.

According to a source from the economic team, who spoke on condition of anonymity, the performance does not consider a worsening of the pandemic, still treated with caution.

A second team source acknowledged that, at first glance, the variant should affect growth, but there are no internal studies on how deeply this should happen.

Another source from the economic team interviewed by Reuters pointed out that the impact of the omicron is not seen as a source of concern for now, at a time when it was not considered a game-changer by market agents either.

While seeking to reaffirm its more optimistic view of economic activity, the Ministry of Economy will not get ahead of the others, the source added.

Publicly, the Secretariat of Economic Policy has already defended that the performance of the economy in 2022 should be strongly helped by the absorption of about five million Brazilians in the labor market, most of them in the informal economy, which was severely affected during the pandemic.

The highly contagious omicron variant, however, could threaten this scenario and the performance of the service sector, which surprised estimates with a strong result in November, helped by mass vaccination in the country.

The University of Washington expects a spike in hospitalizations in Brazil between late January and early March, reaching levels higher than seen throughout 2021. According to the university’s Institute of Health Metrics and Assessment, Brazil will see in mid-March a return to the conditions verified at the end of December in terms of hospital occupancy.