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Brazil economy down 4.1 percent in 2020

Brazil’s gross domestic product (GDP) sank 4.1 percent in 2020, reaching $1.3 trillion—the sharpest yearly decline since 1996, breaking a three-year streak, from 2017 to 2019, when the country’s GDP showed an accumulated increase of 4.6 percent.

The nation’s per capita GDP stood at $6,187.46 last year, a record plunge of 4.8 percent. In the fourth quarter, which wrapped the 2020 outcome, the GDP grew 3.2 percent. The data were released today (Mar. 3) by the government’s statistics institute IBGE.

In the view of Rebeca Palis, IBGE’s coordinator for National Accounts, the result was an effect of the COVID-19 pandemic, when a number of economic activities were partly or totally halted as part of the efforts to curb the spread of the virus. “Even when social distancing measures were loosened, a lot of people were hesitant in consuming, especially in services that may lead to people gathering,” she said.

Shrinkage

Services shrank 4.5 percent, and industry 3.5 percent. These two sectors combined, IBGE reported, account for 95 percent of Brazil’s economy. Agriculture, on the other hand, was up two percent.

Under services, the sharpest reduction (12.1%) was reported in the item encompassing restaurants, gyms, and hotels. Services provided to families, Palis said, were the most severely impacted by working restrictions. The second most dramatic plunge was seen in transport, storage, and mail (-9.2%), especially passenger transport.

In industry, the highlight behind the negative 3.5 percent decline was construction (-7%), which slipped again after the 1.5 percent growth in 2019. Another negative figure was observed in manufacturing (-4.3%), influenced by the shrinkage in the production of auto vehicles, other transport equipment, clothing confection, and metallurgy.

On the plus side, growths in the production of soybeans (7.1%) and coffee (24.4%) helped agriculture expand two percent. The two products saw record production numbers. Some crops, however, witnessed a negative variation in the yearly production estimate—like orange (-10.6%) and tobacco (-8.4%). “This comes as a result of the increase in production and gains in productivity for agriculture, which supplanted the poor performance of animal husbandry and fishing,” the coordinator stated.

Demand

Compared to the previous year, all components linked to demand shrank in 2020. Family consumption had the lowest result since 1996 (-5.5%). A degradation in conditions facing the labor market and the need for social distancing are reported as the chief drivers behind the outcome.

Government consumption declined 4.7 percent—yet another record. Among the reasons is the closing of schools, universities, museums, and parks over the course of the year.

After a positive two-year streak, investments—gross fixed capital formation—also sank (0.08%). The balance of goods and services reported a ten percent fall in imports and a reduction of 1.8 percent in exports.

Reference