The country has entered a technical recession, which this blog has warned about in subsequent publications. The -0.1% data and the second-quarter revision to -0.4 add up to two negative quarters, which is technically a recession. Feels more stagnant than deep recession, but this environment is likely to continue as industry indicators for the fourth quarter are performing poorly.
“I do not exclude another negative result in the fourth quarter,” said economist Sergio Vale of MB Associados.
What is a tech downturn and where is the Brazilian economy heading
The economy has suffered from inflation and the tense institutional environment created by the state. Let us remind you that the month of September, the last month of this quarter, the results of which were published today, began with a week of an extremely difficult crisis caused by the coups of the president of the republic. The economy, which had not developed this quarter, felt it, and the dollar was the clearest channel of data transmission. This, in turn, contributed to the already growing inflation. The economy has received reports of the riots created by the president, this is one of them.
There is an aggravating factor: interest rates started to rise more strongly after this third quarter, which is another sign that the negative environment should continue. Selich started to rise in March, but from a very low level. In June, it was at 4.25%. will end the year above 9%. And as the effect of interest rates intensifies over time, it is now that the economy will begin to feel the tightening of monetary policy.
Some economists were expecting this result, but a few months ago the third quarter was expected to be the best of the year as the economy responds to falling pressures from the pandemic and will be pulled back by resuming services. The service sector had a positive result this quarter, but the economy as a whole is plagued by high inflation and political and financial uncertainty created by the government.
In the future, expectations remain negative, in addition to the risk of a recession for another quarter, forecasts for 2022 refer to a stagnant country. In MB, the rate remains zero. In Itau, it remains at -0.5.
– October and November came out with very bad data, which will jeopardize the GDP of the fourth quarter. This quarter we should have worse results in industry and services than in agribusiness, and ultimately GDP should grow by only 0.1% on a margin, ”said Sergio Vale.
The year that saw a V-shaped recovery from last year’s fall ends with a return to stagnation and a scenario for next year that will maintain that climate next year.
