The Brazilian economy grew 4.6% in 2021, after a contraction of 3.9% with the consequences of the pandemic in 2020. Suddenly, in the eyes of the reader, it may seem good, but in the accurate lens of analysts the truth is that GDP (Gross Domestic Product) is not viewed with much optimism as the basis for comparison is weak.
We recall from memory that there were many “brakes”, in addition to the obstacles inherited from the pandemic, which meant that the GDP was not as positive as it could be in the eyes of the market: 1) stronger than expected inflation and widespread in the economy; 2) devalued exchange rate; 3) effects of the water and energy crisis.
The reopening of the economy allowed the most affected segments to return, especially the service sector, which represents about 70% of Brazilian GDP. Services and industry took off in 2021 due to the weak base of 2020. The agricultural sector, on the other hand, does not start from a low base, as it was the least impacted segment during the pandemic.
Photography is not film and the consolidated numbers for 2021 do not tell the whole story. But I’ll tell you: the quarterly performance of economic activity provides some diagnostics for 2022.
Supply restrictions and rising inflation are the main reasons behind the frustration with the performance of the activity in the recent period. These are the pillars of stagflation projected by analysts for 2022.
The uncertainties about the normalization in the supply of inputs added to the increase in costs – with energy and transport – continue to harm the industrial sector. In turn, persistently high inflation limits households’ purchasing power and, in this way, explains the expected loss of momentum in the service sector over the course of this year. Any sudden bump in agriculture will intensify a further contraction.
Despite the negative effects, investments in infrastructure under the administration of Minister TarcÃsio de Freitas, added to the increase in income transfers by the federal government, are the bets of Minister Paulo Guedes to sustain the economy this year.
“Do not believe the predictions that Brazil will not grow. Brazil will grow and they will make mistakes again,” said Guedes, referring to economists who project a stabilization or a fall in the Brazilian economy in 2022.
The structural reforms are taking their course, telecommunications, natural gas, oil, sanitation and cabotage. Guedes said that Brazil has R$ 828 billion of investments contracted for the coming years and will attract another R$ 300 billion still in this government.
This gain will not appear in the GDP photograph of 2022, but it may be revealed in the film of the coming years. What’s more, this movement can also boost the base’s ability to grow in the long term. In other words, raise the projection for the country’s structural growth, around 1.5%.
Structural growth and fiscal prudence are the irreducible elements that will help Brazil abandon the chicken-flight pattern. I would say that, with GDP of zero or 1% in 2022, the real gain lies in the actions that will pave the future path for sustainable growth that supports employment, income and a higher level of well-being of the population. Especially because, in the digital world, there is no more film to develop — just as the accumulation of economic misconceptions should not be repeated.
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.
