Business & Economy

Brazil’s GDP contracts by record 9.7 pct. in 2nd quarter

Sao Paulo, Sep 1 (efe-epa).- Brazil’s gross domestic product contracted by 9.7 percent in the second quarter relative to the previous three-month period, a record drop that reflects social-distancing measures imposed in a bid to contain the coronavirus pandemic, the government said Tuesday.

Brazil has entered a “technical recession” with this latest setback, having recorded two successive quarters of negative GDP, according to the Brazilian Institute of Geography and Statistics (IBGE).

The country’s GDP shrank by 1.5 percent in the first quarter.

Latin America’s largest economy contracted by 11.4 percent in the second quarter compared to April-June 2019, a decline that also is the biggest since the current record-keeping system began in 1996.

The steep second-quarter contraction was the result of unprecedented declines in the industrial and services sectors, which plunged 12.3 percent and 9.7 percent, respectively, compared to the January-March period. Those two sectors represent nearly 95 percent of Brazil’s GDP.

The agricultural sector, which accounts for just over 5 percent of Brazil’s economy, was in the black, growing at a clip of 0.4 percent due primarily to soy and coffee output.

Investment fell by 15.4 percent between April and June, while household consumption – another key economic growth engine – plummeted by 12.5 percent.

“The results reflect a surge in social isolation, when different economic activities were partially or totally paralyzed to combat the pandemic,” IBGE National Account Coordinator Rebeca Palis said in a statement.

States and municipalities in Brazil, which has reported 3.9 million confirmed coronavirus cases and attributes 121,000 deaths to Covid-19, adopted their strictest social-distancing measures in April and May.

But those measures began to be eased in June – and the country’s main economic activities were allowed to resume – even though the virus has continued to spread.

Brazil’s economy is heading for a historically steep contraction in 2020.

Financial markets are forecasting a 5.3 percent decline, although international financial institutions like the International Monetary Fund and the World Bank are projecting a more drastic drop of between 8 percent and 9 percent.

The onset of the coronavirus crisis brought the country’s tepid recovery between 2017 and 2019 – when annual growth averaged around 1 percent – to an abrupt halt.

Those three years of economic expansion were insufficient for Brazil to completely bounce back from its deep 2015-2016 recession, when the country’s GDP contracted by roughly seven percentage points.

Brazil’s unemployment rate has stood at more than 10 percent since early 2016, and due to the coronavirus-triggered mitigation measures it rose to a three-year high of 13.3 percent in the second quarter (equivalent to 12.8 million people out of work). EFE-EPA


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