Brazilian Economy Would Be 27 Percent Stronger Had It Followed 2014 Pace

RIO DE JANEIRO, BRAZIL – The embarrassing 7-1 defeat in the 2014 Soccer World Cup was nothing like the thrashing Brazil was administered by the economy in the years that followed.

It is no secret that the country has been struggling to try to recover what it lost in its last recession (2015/2016). But when considering how much it could have gained since then – were it not for the bumps in the period – eyes might water.

A calculation performed by MB Associates’ chief economist, Sergio Vale, shows that Brazil could be R$1.8 trillion (US$360 billion) wealthier today, or 27 percent more, had it continued the 2014 growth rate.

The result of these accounts also shows that investments could have reached 52 percent of potential GDP in that period, becoming, along with imports, the largest of the sectors.

It is almost R$800 billion below what could have been reached by now, says the economist in a biweekly letter: “Had it maintained the pace, the investment rate would have stood at 22 percent of GDP and not at 14 percent.”

In addition to having suffered a severe recession at the start of the period considered for the calculation, Brazil experienced other traumatic moments for its economy, such as the impeachment of ex-president Dilma Rousseff in 2016, and the truckers’ strike in 2018, which brought the country’s supply networks to a complete halt.

In the projection, the economist considered the 2013 GDP to reach the accumulated growth by 2020. Concurrently, he also estimated for the productive sectors, considering the average growth between 1997 and 2013.

In the case of the building industry, the survey shows that the sector is 49 percent below potential or R$181 billion lower. The loss is similar for services, the main economic driver today, which could be 30 percent higher.

Even agribusiness would be better, says Vale, although still eight percent below the preceding average growth. The sector that had already experienced significant productivity gains in previous decades boomed in the 1990s when it became the main contributor to the trade surplus.

The public sector is among those that least declined over the past decades. For Vale, one can think of it as an automatic stabilizer in recessions such as we have experienced, but it is worth noting that much of the origin of the crisis experienced in those years originated from the fiscal aspect.

“In any case, it shows a political resilience of the sector compared to others in the economy,” he says.

Where will we end up?

The period that begins in 2014 and runs to the present day is still unknown to the specialist.

“It could be the continuation of mediocre years as seen in previous decades or a new period of deeper economic deterioration,” he says. Changing that depends on the continuity of reforms that have been made, but also on a political stability that we have been lacking for some years now.

“There is no mistaking that the recent reassurance of the Bolsonaro government is sufficient to believe in the speech of the Minister of Economy that Brazil will surprise the world,” he says.

It’s worth noting that the period between 1997 and 2013 should not be considered particularly strong on average growth, “which only places the result in an even worse situation.”

Source: Exame

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error