Brazil emerges from recession and rebounds with record 7.7% growth, but does not return to pre-pandemic level

Brazil’s gross domestic product rebounded 7.7% in the third quarter from the previous three months, but suffered a 3.9% contraction from the same period in 2019, according to data provided by the Institute Brazilian Geography and Statistics (IBGE) this Thursday.

Between January and September, the country’s GDP contracted 5% compared to the previous year, due to the fall in industry (-5.1%) and services (-5.3%), offset by the growth in agricultural services (2.4%), of the coronavirus pandemic and its economic consequences.

Compared to the second quarter, the largest economy in Latin America grew 7.7% due to increases of 14.8% in industry and 6.3% in services, in line with the withdrawal of social distancing measures and the closure of factories and stores due to the pandemic. Agriculture, for its part, fell 0.5% from the second quarter.

Among the industrial activities, he highlighted Growth of 23.7% in the manufacturing sector. Electricity, gas and water (8.5%), construction (5.6%) and mining (2.5%) activities also grew.

All sectors advanced in the service sector. Thus, trade rebounded to 15.9%; transportation, warehousing and mail increased 12.5%, while other service activities increased 7.8%. Information and communication services (3.1%); administration, defense, public health and education and social security (2.5%); financial activities, insurance and related services (1.5%) and real estate activities (1.1%).

From an expenditure standpoint, gross fixed capital formation increased by 11% compared to the immediately preceding quarter. Household consumption expenditure increased 7.6% and government consumption expenditure increased 3.5%.

Exports of goods and services fell 2.1%, while imports of goods and services fell 9.6% from the previous quarter.

Far from recovery

Compared to the year-on-year change, Brazil’s GDP fell 3.9% from 2019, which means the third consecutive contraction of the country’s economy.

For analysts, the growth of this third quarter does not mark the end of uncertainty. The future is surrounded by doubts about the imminent end of massive subsidies to mitigate the impact of the coronavirus pandemic.

“It’s a time when we pile up more questions than answers,” said economist Jason Vieira of Infinity Assets.

The result disclosed by IBGE is ilower than average expectation growth of 8.8% of the 39 experts consulted by the Brazilian newspaper Value, and does not compensate for the losses of the year.

The country had fallen into technical recession after two consecutive quarters of economic contraction (-1.5% in the first quarter and -9.6% in the second, according to data corrected upwards on Thursday).

Falls compared to 2019

By branch of activity, only agriculture recorded a positive behavior, with a growth of 0.4% compared to the same period of 2019. The result is mainly explained by production growth and productivity gains. agricultural activity, which compensated for the poor performance of livestock and fishing.

For its part, the industry fell 0.9%. Within the activity, construction fell by 7.9% due to the drop in the occupancy rate; while the manufacturing industries posted a negative variation of 0.2%.

Electricity, gas and water activities grew 3.8%, driven by improved tariffs. Extractive industries grew 1% from the third quarter of 2019, driven by growth in oil and gas extraction, according to IBGE.

The service sector, for its part, fell by 4.8% compared to the same period in 2019, highlighting the decline in other service activities (-14.4%) and transport, storage and mail (-10, 4%). We also note a contraction in administration, defense, public health, education and social security (-5.4%), trade (-1.3%), information and communications (- 1.3%). At the same time, financial activities, insurance and related services (6.0%) and real estate activities (2.7%) grew.

Household consumption spending fell for the third consecutive quarter (-6.0%), influenced by the COVID-19 pandemic which, in addition to negatively affecting the labor market, caused a drop in the supply and demand for services with a significant weight in the consumption of families.

The International Monetary Fund’s (IMF) forecast for the Brazilian economy in 2020 indicates a contraction of 5.8%, while the World Bank forecasts a decline of 5.4%.