GDP in 2020 and Some Indications for 2021
The deepest of all recessions tracked by the CODACE lasted two quarters and caused GDP in 2020 to contract by 4.1%. On the demand side, the performance of household consumption was fundamental for the recovery that occurred in the third and fourth quarters. The greatest contribution came from the increase in real retail sales, which were stimulated by the Emergency Relief program, although this contributed little to consumption of services, which were more affected by social distancing. In turn, the effect on aggregate demand of the strong rebound of gross fixed capital formation was partly offset by growth of imports. In particular, the investments of Petrobras increased, in the guise of imported oil platforms, while the other component of GFCF, civil construction, remained in the doldrums throughout the year (and still has not shown signs of recovery). Given that the drop of 4.1% in 2020 has left a carry-over of 3.6%, GDP in 2021 should expand. Global recovery will favor growth in Brazil higher than 3.6%. Vaccination is moving forward in Europe and the United States, and in both places, the authorities are instituting strong monetary and fiscal stimulus policies. Nevertheless, there are two contrary forces: the pace of vaccination and the propagation of the pandemic. So far, the speed and intensity of the propagation have greatly exceeded those measures of vaccination, with still unknown effects on economic activity in the first quarter (the worsening of contagion has mainly been occurring in March) and in the second quarter.
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