Brazil heads for recession after fall in first-quarter GDP
Andres Schipani in São Paulo
Brazil’s economy shrank in the first quarter of this year, paving the way for a recession as the country became a global coronavirus hotspot in the wake of a botched response to the pandemic from right-wing President Jair Bolsonaro.
Gross domestic product in Latin America’s largest economy plunged by 1.5 per cent in January to March versus the last quarter of 2019, official data showed.
“The same thing happened in Brazil that happened in other countries affected by the pandemic, which was a drop in services to families due to the closure of establishments,” said Rebeca Palis at the national statistics institute, IBGE. “Durable goods, vehicles, clothing, beauty salons, gyms, accommodation, food have all suffered a lot from social isolation.”
Compared with the same period last year, the economy shrank 0.3 per cent. “Even if the quarantine is lifted, economic recovery will be very slow in Brazil. Lots of companies will fail, lots of people will be unemployed,” warned Luana Miranda, a researcher at the Brazilian Economy Institute.
Official data on Thursday showed 4.9m Brazilians lost their jobs in the three months through April, pushing the number of people out of work to 12.8m after lockdowns to fight the pandemic started in late March.
“We expect Brazil to experience a sharp contraction of activity in 2020, concentrated in the first half of 2020, which is likely to lead to a significant further deterioration of the already weak labour market,” said Alberto Ramos, Latin America economist at Goldman Sachs, who forecast that the country’s economy would shrink 7.6 per cent in this year.
“In recent weeks Brazil became one of the global hotspots for new infections and so far there is no clear indication when the curve peak will be reached,” he added. The number of infections topped 438,000 on Thursday.
President Bolsonaro has frequently downplayed the seriousness of the virus, putting him in conflict with state governors and alarming business.