Ipea revises GDP growth from 3% to 4,8% in 2021

The Institute for Applied Economic Research (Ipea) released, this Wednesday (30/6), the quarterly analysis of the Brazilian economy. The significant recovery of the economy since the third quarter of last year led to the revision of Gross Domestic Product (GDP) growth in 2021, from 3% to 4,8%. For the second half of this year, there is an expectation of more sustained growth in economic activity, with the advancement of vaccination against Covid-19, the more favorable external environment and the reduction of fiscal uncertainties in the short term. There is a projection of 12,6% interannual growth in the second quarter of this year. For 2022, the researchers projected GDP growth of 2%, lower than the 2,8% predicted in the previous release, made in March in the Ipea Situation Letter, due to the increase in the basis of comparison, GDP in 2021. Despite this reduction, accumulated growth in the two-year period went from 5,9% to 6,9%.

The crucial hypotheses for the scenario involve controlling the pandemic in Brazil through vaccination and maintaining a relatively stable scenario for fiscal policy in the short term - especially in relation to the spending ceiling. The possible increase in interest rates in the United States represents a risk factor, as it could put pressure on the exchange rate and interest rates in Brazil.

The favorable external scenario has positively impacted the Brazilian economy through the appreciation of commodities exported by the country, the increase in international trade flows and global financial conditions that stimulate risk appetite and, therefore, greater capital flows to emerging countries. The international price of commodities has reflected the resumption of global economic activity, with strong growth in recent months and a historically high level. Brazilian exports jumped, both in volume and value, benefiting from the growth of the world economy and the increase in foreign prices. From January to May this year, exports grew 40%, compared to 12% in the same period last year. Imports also recovered, reflecting the level of domestic activity, registering growth of 21% in the first five months of the year compared to the same period in 2020.

The projection for the IPCA in 2021 was revised from 5,3% to 5,9%. The inflation rate accumulated in 12 months, up to May this year, rose from 6,8% to 8,1%, impacted by the rise in monitored prices and industrial goods. The 2,1% increase in administered prices in May reflected not only the activation of the red flag and its impacts on electricity, but also the new increases in medicines, gas and gasoline. Monitored price inflation was revised from 8,4% to 9,7% this year. Industrial consumer goods are expected to rise from 4,3% to 4,8%. The inflation expectation for free services, except education, was revised from 4,0% to 4,2%. Food and education inflation were maintained at 5% and 3,8%, respectively. For 2022, researchers predict a slowdown in inflation, both for the IPCA and the INPC. Therefore, the IPCA should end 2022 at 3,9%, slightly above the 3,7% estimated for the INPC.

The report presents mobility indicators in Brazil during the Covid-19 pandemic and compares them with economic activity indicators. The researchers showed the evolution of mobility indicators, between April 2020 and June 2021, in the four types of establishments most related to economic activity: retail stores and leisure places; markets and pharmacies; public transport stations and workplaces. They concluded that there was a drop in mobility in all locations between the end of 2020 and the months of March and April 2021, which may have negatively impacted economic activity. From May onwards, mobility indicators increased again.

The fiscal scenario was also analyzed by Ipea researchers. According to them, public accounts have improved in recent months. Federal revenues grew 16,6% in real terms in the year to April. This growth, higher than projections, led to an important revision of the total expected for 2021, influencing the fall in the primary deficit predicted for the year. The expenses planned for the year were reevaluated downwards, reducing the need for adjustments in order to comply with the Union's spending ceiling. For 2022, greater space is expected to comply with the spending ceiling due to the expected behavior of price indices that will correct the ceiling and an important portion of mandatory expenses. Debt as a proportion of GDP benefited from the primary surplus in the first four months and from nominal GDP growth, which surprised due to the acceleration of the implicit deflator, in addition to higher real growth. As a result, there was a downward revision of the expected trajectory for the gross debt/GDP ratio in the coming years.