Pandemic clouds economic scenario
Economic activity is expected to slowdown in the coming weeks due to stronger social-distancing measures adopted by states and municipalities in reaction to the uncontrolled advance of Covid-19 and the slow rate of vaccination.
A contraction like the one in March and April of 2020 is not expected, but the prospects are negative. GDP is expected to fall in the first and second quarters in a scenario still marked by high inflation, which in the middle of the year may reach 8% in the 12-month period.
In this environment, expectations for employment and income have worsened. It is possible that governors and mayors will have to extend the rigid confinement period, affecting specifically the service. This week, Brazil is expected to hit two tragic milestones - 3,000 deaths daily and a total of 300,000 caused by Covid-19.
Fighting back this situation requires coordination between the federal government, states and municipalities, but President Jair Bolsonaro continues to loudly oppose social distancing - last week he filed a lawsuit with the Federal Supreme Court (STF) against the curfew adopted by Bahia, Rio Grande do Sul and the Federal District.
With a weak labor market, the outlook for consumption is bleak. In addition, the new round of emergency aid will only start in April. And, given fiscal restrictions, the initial plan is for the benefit to last four months, with values ranging from R$150 to R$375 paid to 46 million people. In 2020, the government paid five monthly installments of R$600 and four installments of R$300, reaching almost 68 million people in certain months.
Consulting firm A.C. Pastore & Associados points out in a report that the federal government's conduct during the pandemic created conflicts that worsened the prospects for 2021. "In order to recover the economy and start growing again, it is necessary to first vaccinate the population as soon as possible. The lack of vaccines, as a result of the government's negligence, fuels a new wave of contagion much greater than that seen at the beginning of the pandemic," says the firm owned by former central banker Affonso Celso Pastore.
The document notes that the first signs of a slowdown were reflected in the various confidence indexes and appeared clearly in January's retail sales. According to A.C. Pastore, with a smaller amount of cash transferred to a much lower number of beneficiaries, consumption's behavior will be dominated by the weak the labor market. "Retail has a...
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