Lost decade? Brazil stagnation spells uncertain economic future

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A study carried out for the National Strategy for Economic and Social Development (2020-2031) reveals that Brazil may maintain a low average growth rate between 2021 and 2031.

The report, released on Monday, points out that the pace of growth in economic activity should be parked at 1.3% GDP growth after 2021 and remain so for the entire decade.

According to the study, the reason would be the maintenance of the rhombus in the public accounts, that would put a permanent risk the growth of the country.

With the consequent increase of economic austerity, the fiscal deficit would only be solved in 2025.

The National Strategy for Economic and Social Development (2020-2031) is guided by the Federal Audit Office (TCU) and has a 12-year target plan as of 2018. The document was released on Monday and will remain open for public consultation until Friday.

This type of prognosis marks a change in the type of planning, which leaves a short-term pattern and starts to operate in the medium and long term, alongside a bill that Congress has been working on to keep this plan.

The document is based on the figures presented in the 2019 Budget Guidelines Law, LDO 2019 , which shows GDP growth of 3.0% in 2019, 2.4% in 2020, and 2.3% in 2021.

Despite the numbers indicated in the LDO 2019, based on March figures, the Central Bank’s FOCUS report points to a more pessimistic scenario.

In the last 4 weeks, the GDP forecast for 2018 has been falling. If in May the forecast was 2.51%, the percentage fell to 2.18% last week and reached 1.94% in the report released Monday. In 2017, the LDO believed that the country would grow 2.5% this year.

By 2019, however, the Central Bank forecasts no longer converge with the previous proposal in LDO 2019 for next year’s GDP. While the law has forecast 3% growth, experts at the Central Bank do not believe that growth will exceed 2.8%. This was the first week that the bulletin posted a negative change in GDP growth forecast for next year.

In 2016, the same bulletin from the Central Bank indicated a growth of 2% of GDP in the following year, which instead closed the year with only 1% growth, close to the number predicted by the LDO-2016.

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