Brazil’s Economic Problems

From an Economist newsletter:

Brazil’s statistics agency will today release GDP figures for 2020. Thanks to generous handouts to the poor since the start of the pandemic, which fuelled consumption, the economy fared better than many had feared. A survey by Fundação Getulio Vargas, a university and think-tank, predicts growth of 2.5% in the fourth quarter compared with the previous quarter, and an annual contraction of 4.3% for the whole year. Brazil’s covid-19 dip followed three years of muted growth (around 1%) and exacerbated a fiscal crunch, with public debt approaching 100% of GDP. Fears that economic populism may trump reforms in the lead-up to an election in 2022 have sent the country’s currency tumbling in recent weeks. Unemployment is nearly 14% and could rise again with new lockdowns due to another spike in covid-19 deaths, the worst yet. The central bank’s weekly survey of financial institutions forecasts GDP growth of 3.3% this year. That may be wishful thinking.

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