Economy is at a standstill and should remain so in 2022, says expert

Considered the preview of the Gross Domestic Product (GDP), the Central Bank Economic Activity Index (IBC-Br) amended two hikes in November and December 2021, closing the year with an increase of 4.5%. But despite the results, Marcelo Kfoury, professor of economics at FGV-EESP, says that the Brazilian economy is at a standstill, and should continue to do so in 2022.

“We have to think about the margin, in November and December the GDP was not bad, the IBC-Br was 0.5% in November and now 0.3% in December, so at the end of the year there was apparently a recovery, but if take the fourth quarter of last year, growth will be close to 0%”, he said in an interview with CNN this Friday (11th).

He assesses that the scenario in the second half was of a slowdown in the economy, with some negative GDPs. “The economy grew strong in the first quarter and then stopped in the second, third and fourth, and is around 0%”.

The growth in the year of 4.5%, according to him, is also “a little misleading”. The reason is that the rise is practically equivalent to the fall of 2020, due to the pandemicwhen the GDP retreated 4.1%.

“If you take the two years, it’s kind of zero to zero, so the economy is kind of stopped, almost stationary, and the outlook for 2022 is there too”, he says.

The economist says that there is still little economic data for January 2022, but vehicle production, for example, was “very bad”. At the same time, industrial, services and commerce confidence in the month were all negative, which he considers to be a “bad sign” for the first quarter.

“At the end of the year, even with some recovery in the industry, there was a strong number in services and retail sales were at zero to zero. All together it shows that the economy is pretty close to stability,” he says.

Economic stagnation is linked to high inflationwith a consequent increase in fees by the Central Bank to combat it. As the municipality signaled that the upswing cycle will still continue in 2022, Kfoury says that “monetary policy will not help the economy to grow this year”.

On the other hand, fiscal policy may have “some help” in growth, since in election year it is common for investments by the Union and states to increase.

In case of service sector growth in 2021, the professor states that “there was a lag in the service sector to recover. The industry recovered very strongly and has been skating since July”.

“Having been in social isolation for the longest time, services are recovering last, so this 10% growth number is a little misleading because it is the recovery from the pandemic that came later”, he says.

“The sector industrial there was a strong demand right after the pandemic, but there is a shortage of parts, so the 24% drop in vehicle production in January compared to January 2021 is because there is a shortage of parts, especially electronic components, not only for cars, but for the entire industry, so even with the demand, the sector is not managing to grow due to logistical issues”, he evaluates.

On the other hand, Kfoury assesses that “there is still a lot to recover in terms of falling unemployment. It has chances of continuing to fall, which is good news. In terms of income, let’s see what inflation will look like. For this year, they are predicting between 5% and 6%, which is some improvement and can reduce the impact”.

* Under supervision of Elis Franco