Brazil’s economy shrank last year by 4.1 percent amid the pandemic, data showed on Wednesday, the worst drop in decades, but not as much as originally expected due to cash transfers to the poor.
Latin America’s largest economy grew by 3.2 percent in the fourth quarter, according to official statistics agency IBGE, more than the 2.8 percent median estimate in a Reuters poll of economists.
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“People expected us to fall 10 percent,” said President Jair Bolsonaro, who has played down the gravity of the pandemic and opposed lockdowns.
“What made the economy move, in part, was the emergency aid,” he told reporters, adding that his government has done everything possible to keep the economy running.
Still, a second wave of COVID-19 has killed Brazilians in record numbers in recent weeks, clouding the economic outlook and adding to fears of a renewed downturn early this year.
The full-year 2020 drop was the worst since the current IBGE series began in 1996. The 2020 plunge was also the worst since a 4.35 percent fall in GDP recorded in 1990, according to central bank data going back to 1962, and the third-steepest in that series.
Among the gloomiest forecasts at the onset of the pandemic, the World Bank and International Monetary Fund estimated that Brazil’s 2020 GDP would shrink by 8 percent and 9.1 percent, respectively.
The 3.2 percent expansion in the fourth quarter was led by 2.7 percent growth in services, 3.4 percent expansion in household consumption, and a 20 percent surge in fixed business investment, IBGE said.
“We had a big fall [in activity] last year, but with the emergency aid, it was much smaller than originally predicted. It could have been much worse … but the public finances are now very fragile,” said Alexandre Almeida, economist at CM Capital in Sao Paulo.
The government’s cash transfers to millions of poor families last year totalled some 322 billion reais ($56.5bn), a fiscal boost of approximately 4.5 percent of GDP.
Mexico, which did not provide anywhere near as generous a fiscal support package, saw its economy slump 8.5 percent last year.
During the course of the year, however, only Brazilian agriculture showed positive growth, up 2 percent from 2019. Services and household consumption fell 4.5 percent and 5.5 percent, respectively, due to COVID-19 and restrictions to combat its spread.
GDP per capita fell 4.8 percent, IBGE said, the steepest decrease since at least 2000.
IBGE figures show economic activity is still 1.2 percent below its level at the end of 2019 and 4.4 percent below its peak in 2014.