Covid-19: Brazil will lose US$240 billion income from pandemic, says Unctad

RIO DE JANEIRO, BRAZIL – Brazil will suffer an income loss of US$240 billion between 2020-2025 because of the effects of the pandemic of Covid-19, according to projections of the United Nations Agency for Trade and Development (UNCTAD).

Globally, the entity calculates that developing countries will be US$12 trillion poorer by 2025 after having been affected by the pandemic.

In the case of Brazil, the projection is that this impoverishment will represent US$146 billion between 2020-21, or 8% of the Gross Domestic Product (GDP). Between 2022-2025, Brazil would lose another US$94 billion.

Thus, in the accumulated period 2020-2025, the country’s income loss would be US$240 billion, equivalent to 13.2% of the Gross Domestic Product (GDP).

In Brazil, says Unctad, “despite the pandemic’s heavy human cost, the economy contracted by only 4.1% in 2020, the smallest impact among the largest Latin American economies.”

In its annual report, the UN agency notes that expansionary fiscal and monetary policy helped Brazil mitigate the economic impact of Covid-19. By 2021, a recovery in commodity prices and gradual removal of fiscal stimulus should help GDP growth by 4.9%.

On the positive side, Unctad says vaccination and services demand is likely to accelerate in Brazil’s second half of 2021. On the negative side, it notes that supply shortages from hydroelectric plants have boosted inflation, which in turn is forcing the Central Bank to raise short-term interest rates “to a contractionary level.”

It also notes that in Argentina, Brazil, Nigeria, South Sudan, Sudan, and Zimbabwe, the prices of one or more staple foods have reached abnormally high levels by mid-2021, which could negatively impact food access.

The Latin American and Caribbean region as a whole was severely hit by Covid-19, with high rates of contagion and mortality, along with a sharp economic slowdown. GDP for the entire region fell by 7.1% in 2020, and Unctad projects growth of only 5.5% in 2021.

Latin America struggles with rising inflation due to the international spike in food prices and volatile exchange rates, “caused by the region’s excessive specialization in commodity exports and high exposure to speculative international capital flows.”