We won, but we are heading towards a better year

We won, but we are heading towards a better year

2020 unprecedented: The combination of external and internal shocks caused the world and many sectors of the economy to stop at the same time. But that’s how it is 2021? In the article below, the chief economist of Banco PV, Roberto Podovani, Analyzes the plight of countries plagued by the epidemic, emphasizing that there will be problems in controlling public debt for this government and the next, but that next year we are moving towards a better known world.

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* Written by Roberto Podovani

For the first time in history, all countries and departments were shut down at the same time. For the first time, there was a combination of external and internal shocks, with supply problems collapsing in demand.

It was a dream. The outbreak of a health problem warning in China in late January reached Italy and sparked disillusionment when prisoners in Brazil began their march in March. April is a critical time with the shock of unprecedented proportions. Vehicle production in Brazil has come to a standstill and the unemployment rate could reach 24% if people who stay at home and do not look for work are considered unemployed. Like all recessions, political tensions have escalated and made the situation worse.

But just as the crisis is unique, the reaction of governments is unprecedented. Rising public spending, lowering interest rates and substantial cash flow in the markets are rapid and aggressive.

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Without any historical reference, the deep lack of information created the task of estimating the magnitude of the contraction and the strength of the recovery complex. The most pessimistic forecasts, and the easiest to be pessimistic, came to talk about a recession of more than 7.0%. In June, the International Monetary Fund fell 9.1%.

However, what was found was that, with precisely strong stimuli, the recovery was much faster than globally expected. In Brazil, the recession is expected to be 4.5%. But not without costs. There are negative traditions in the years to come.

The first challenge will be to pay off the huge debt to pay for the infection. Brazil will delay this and the next presidential term to control public debt. Another legacy would be the unemployment rate, which is expected to start at around 15% by 2021.

There is also good news. With the advent of vaccines and lower costs and incentives, the world economy begins a new growth cycle. The result will be a recovery in commodity prices, which are currently at their lowest level in forty years, after US currency inflation eased.

It also helps keep inflation and interest rates at historically low levels in Brazil. The debt-sensitive sectors are already showing a recovery, while the gradual reopening of the economy is in favor of the service sector, which is too late to restart.

Therefore, we are still fainting from the bottom of 2020 and we will never be the same again. But all in all it indicates that we are already moving towards a well-known world in 2021.

*Roberto Podovani is the Chief Economist at Banco PV

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