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Effect on the economy of the return of emergency aid to be modest – Economy

(photo: Marcello Casal Jr / Agencia Brasil)

The return of emergency aid it will help millions of Brazilians to pay their bills and put food on the table. However, unlike what happened at the beginning of pandemic of the new coronavrus, the release of the benefit will not have the same effect on economic activity. Analysts explain that the measure should not prevent a drop in the Gross Domestic Product (START) at the beginning of this year; and even speak in a withdrawal this semester, even with the return of government aid to the most vulnerable.

The new round of emergency aid has been agreed in the last few days by the federal government with the National Congress and has caused revisions in this year’s economic projections. After all, in 2020, the benefit raised the income, stimulated the consumption of Brazilian families and, thus, practically halved the fall in Brazil’s GDP – at the beginning of the pandemic, international organizations projected a 9% drop in the Brazilian economy in 2020, but this impact should be close to 4.05%, as the Central Bank’s Economic Activity Index (IBC-Br). Anyone who has already accounted for the economic impact of the new emergency aid, however, says that the measure will not have such a big effect in 2021. After all, this time, the program will be leaner.

The government’s idea of ​​combing the register of the 68 million Brazilians who received the benefit last year to continue paying aid only to those who still need it, and thus spend less. For this reason, the new aid should reach a public of 32 million to 40 million people for a period of four months, from March to June, when the advance of the vaccination allow the normalization of the Brazilian economy. And the amount worked by the economic team for the new aid varies between R $ 200 and R $ 250, although the National Congress wants to bring the figure closer to the R $ 300 or even the R $ 600 paid in 2020. The total cost of the program, which reached R $ 294 billion last year, should therefore be close to R $ 30 billion in 2021.

Due to this decrease in emergency aid, XP Investimentos calculates that the program will cause a 1% increase in the country’s expanded mass of income this year, but will not compensate for all the loss of income caused by the covid-19 pandemic, as it took place in 2020. “This time, it doesn’t make up for everything, because unemployment is still high and aid has a much more limited scope. For this reason, families must feel a negative impact on income, even with the second round of emergency aid ”, said XP Investimentos economist, Lisandra Barbero.

Many analysts also believe that a large part of this money should not be used for consumption. After all, the aid will be less and should arrive only in March, when many Brazilians will have been without government aid for two months, without work and, consequently, with more debts to pay. “Whoever needs it most will do the consumption of the first necessity, but sometimes, even to shop at the grocery store, they need to pay their debts first. So, a good part of these resources should be used to pay bills that are overdue, such as the market, the water bill, the electricity bill. Therefore, there will be less resources for consumption and the impact on GDP will be less ”, evaluated the chief economist of MB Associados, Sergio Vale.

In addition, pointed out Lisandra Barbero, it is difficult to imagine that Brazilians who took advantage of emergency aid to buy durable and semi-durable goods, such as household appliances, or to make renovations at home, make these purchases again. “Part of consumption was anticipated. For this reason, the aid will have an impact on sales, but it will not be as big as the one in 2020. The food and beverage trade should feel the effect more, but not so essential goods ”, said the economist.

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Thus, XP Investimentos believes that the aid will increase household consumption by 0.13 percentage points in the second quarter and by 0.21 percentage points in the third quarter of 2021. a much more modest increase than last year, when the aid made Brazilian retailers reach record sales levels – the Center for Research in Macroeconomics of Inequalities (Made) of the University of So Paulo (FEA / USP) estimates that the consumption of Brazilian families could have plummeted to 14.7% in 2020 for account of the covid-19 crisis, but fell 6% as it was driven by emergency aid.

Because of this, the return of emergency aid should not cause significant changes in Brazil’s GDP in 2021, according to economists. On the contrary, what has been seen in recent weeks are negative reviews of economic activity. In the last Focus Bulletin, for example, the median of market projections for this year’s GDP fell from 3.47% to 3.43% last week. “For now, the impact on annual GDP is zero. We maintain the projection of a GDP of 3.4% this year, despite the new aid round, not least because we also need to understand what the counterfactuals of the new aid round will be. The fiscal effect, for example, can increase the Brazil risk, depreciate the exchange rate and increase inflation, slowing consumption, if it is not well calibrated ”, explained the economist at XP Investimentos.

The fiscal framework requested by the Minister of Economy, Paulo Guedes, as a counterpart for the return of emergency assistance, goes through the proposals for Constitutional amendment (PECs) of the Emergency and the Federative Pact and should be voted on next Thursday by the Senate. The text that will be taken to plenary, however, must be much leaner than the one initially imagined by Guedes. In order to ensure that the measure passes in a clerical way through Congress and allows emergency aid payments to be resumed in March, the text should avoid political issues and focus only on what is necessary to unlock emergency aid. Cost cutting measures, such as reducing public servants’ salaries, for example, should be put on hold for another time.

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Technical withdrawal

The outlook for economic growth is being revised downwards, even in the face of negotiations on the return of emergency aid, because the beginning of the year has been marked by a sharp reduction in economic activity. Experts even work with a negative GDP in the first quarter and some houses also project a negative GDP in the second half, which would lead the country to a technical recession.

Projections for GDP in this first quarter range from a drop of -0.1% to a contraction of 0.8%. After all, millions of Brazilians are still without assistance and the intensification of the covid-19 pandemic has placed new restrictions on the functioning of economic activities. The trade and services sector, which accounts for about 70% of the Brazilian economy, for example, has suffered from a retraction in sales since the end of last year. In December, retail plunged 6.1% and services, -0.2%, according to the Brazilian Institute of Geography and Statistics (IBGE).

Analysts believe that the negative results will continue in the first months of the year. “There is a worsening in services and trade, especially in the categories that are more sensitive to social distance, due to the increase in the pandemic and the loss of income. The aid helps, but it is not enough to compensate for these losses, since it comes in a lower amount than last year ”, analyzed Luana Miranda, a researcher from the Brazilian Institute of Economics of Fundao Getulio Vargas (Ibre / FGV).

Therefore, Ibre / FGV estimates that Brazil’s GDP will fall 0.4% in the first quarter and 0.8% in the second quarter of this year. The projection points to a technical recession, which is characterized by two consecutive quarters of GDP decline. a perspective that is also already in the scenario of institutions such as MB Associados and BNP Paribas: the consultancy projects a GDP of -0.8% in the first quarter and -0.3% in the second.

Although negative in the short term, “there should be a recovery in the second half, with the progress of vaccination”, explained the chief economist of MB Associados, Sergio Vale. Still, he projects a GDP of just 2.3% in the year. it is a more pessimistic projection than that of the rest of the market, which today projects a growth of 3.4% in 2021.

“In the second half, we should have an average growth of 2.4% per quarter. It is an important growth, because it takes vaccination into account, which will allow the resumption of services, with the end of mobility restrictions ”, explained Luana Miranda. Ibre / FGV, on the other hand, is a little more optimistic and projects a GDP of 3.6% in 2021. “About 3%, however, I carry statistics,” explained the researcher. (MB)

Or what or coronavrus

Coronaviruses are a large family of viruses that cause respiratory infections. The new coronavirus agent (COVID-19) was discovered in December 2019 in China. The disease can cause infections with symptoms initially similar to colds or flu, but with the risk of getting worse, which can result in death.

The transmission of coronaviruses usually occurs by air or by personal contact with contaminated secretions, such as saliva droplets, sneezing, coughing, phlegm, close personal contact, such as touching or shaking hands, contact with contaminated objects or surfaces, followed by contact with mouth, nose or eyes.

The recommendation is to avoid crowding, stay away from those who show symptoms of respiratory infection, wash your hands frequently, cough with your forearm in front of your mouth and often use soap and water to wash your hands or gel alcohol after contact with surfaces. and people. At home, take extra care against COVID-19.

Main symptoms of people infected with COVID-19:

  • Fever
  • Cough
  • Shortness of breath and difficulty breathing
  • Gastric problems
  • Diarrhea
  • In severe cases, victims have:
  • Pneumonia
  • Severe acute respiratory syndrome
  • Renal failure
  • The types of symptoms for COVID-19 increase every week as researchers move forward in identifying virus behavior

Myths and truths about the virus

On social media, the spread of COVID-19 also spread rumors about how the Sars-CoV-2 virus is transmitted. And other doubts arose: Is alcohol gel capable of killing the virus? Is the coronavirus lethal at a worrying level? Can an infected person infect several others? Will the epidemic kill thousands of Brazilians, as SUS would not be able to serve everyone? We did a report with a doctor specializing in infectology and he explains all the myths and truths about the coronavirus.

To learn more about the coronavirus, read also:


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