Brazil’s recovery could turns slow

The risks associated with the evolution of the pandemic in Brazil and the cooling of emergency aid granted by the Government of Jair Bolsonaro could imply a scenario of slower economic recovery or even a temporary reversal of it.

This was indicated by the members of the Monetary Policy Committee (Copom) of the Central Bank of Brazil during their last monetary policy meeting, in which they decided to keep interest rates, measured by the ‘Selic rate’, at 2 % .

In the minutes of the meeting, central bankers continue to point out the scarce possibility of forecasting in the evolution of the pandemic, to which is added the necessary adjustment of public spending as of 2021. All this increases the uncertainty about the resumption of economical activity. 

However, members of the committee indicate that the economic evolution until the end of 2020 is “surprisingly positive”, despite the partial withdrawal of aid programs. The Central Bank pointed out that, however, the data do not include the effects derived from the new wave of infections.

In this context, the committee considers that the pandemic continues to have heterogeneous effects on economic sectors. Thus, activities related to the service sector are the most affected by measures of social isolation and confinement. The members of the committee understand that the evolution of the sectoral gaps will depend on the evolution of the pandemic and the adjustment of public spending.

K. Tovar

Source: dpa