January 20, 2021

Economic activity grew 0.89% in Brazil in 2019 and frustrates forecasts

Economic activity grew by 0.89% in Brazil in 2019, well below that predicted by economists, according to an indicator released Friday by the Central Bank and that is used to forecast the result of gross domestic product (GDP) of the country.

The disclosure of the so-called Central Bank Economic Activity Index (IBC-Br), considered as the previous GDP, frustrated the Government and economists, who expect Brazilian economic growth in 2019 to be above 1%.

While the financial market expects 1.12% growth in 2019, the same index projected by the Ministry of Finance, the Central Bank calculates it at about 1.20%.

The official growth of Brazil’s GDP last year will only be disclosed on March 4, but the indicator presented today by the issuer, despite using another method of calculation, questioned the latest projections of economists.

In any case, if the result is confirmed, Brazil will complete three consecutive years of economic growth following the historic recession it suffered in 2015 and 2016, in which its GDP contracted about seven percentage points.

Growth of less than 1% in 2019 represents a slowdown, as the Brazilian economy had expanded 1.3% in 2017 and 1.3% in 2018.

The economists of the financial market, who expected for 2019 a growth close to 1.12%, foresee that the economy will finally expand more strongly in 2020, by the time they project an improvement of 2.3%, and that this index will reach 2 , 5% in 2021, according to a survey released last Monday by the Central Bank itself.

For the Government, this sustainable growth in the coming years is necessary to reduce unemployment, one of the biggest concerns of the country today and that in the last quarter it was located in 11% of the economically active population, which means that 11.6 million Brazilians are unemployed.

According to the indicator released today by the Central Bank, Brazilian economic activity fell 0.27% in December compared to November but grew 1.28% in comparison with the same month of 2018.

Similarly, the growth of economic activity in the last quarter of 2019 was 0.46% compared to the immediately previous quarter and 1.36% compared to the last three months of 2018.

The IBC-Br is an approximate calculation of the GDP that the Central Bank uses to make decisions on monetary policy and that includes information on the level of activity of industry, commerce, services and agriculture.


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