Letter IEDI n. 1136—Brazil GDP in 2021–2022: little to celebrate
Brazil's GDP increased +4.6% in 2021, more than offsetting the decline of 2020 (-3.9%) due to the initial impact of the COVID-19 pandemic. Despite this, there is not much to celebrate—and for several reasons, some of which will be addressed in this Letter IEDI.
First of all, because the country continued to impoverish. In spite of its expansion in 2021 (+3.9%), GDP per capita did not fully recover from the strong loss of 2020, remaining below its pre-pandemic level and far below that of a decade ago. In real terms, it ended 2021 with a value 5% lower than in 2010. The 2015–2016 crisis and COVID-19 overlapped and led to this situation.
Second, the two main components of aggregate domestic demand reached the end of last year with little dynamism. In Q4'21, household consumption, greatly affected by inflation and unemployment, grew 2.1%, half of what it had grown in Q3'21 (+4.2%) compared to the same period of the previous year, and registered only +0.7% in the seasonally adjusted series.
Investment, which is one of the main drivers of GDP growth, left behind the double-digit rates it had been presenting and grew 3.4% in Q4'21 compared to Q4'20. In relation to Q3'21, after eliminating the seasonal effects, the situation approached mere stability, with a rate of 0.4% following declines in two quarters in a row.
Third, performance was asymmetrical across sectors. Agriculture and livestock fell in 2021, while services and the industry recovered. But even between the latter, however, there are important differences. Services were the only sector to grow in Q4'21 (+3.3% compared to Q4'20), with the help of expanding vaccination coverage against COVID-19, registering an increase of +4.7% in 2021. It was also the only one to stay in the black throughout the past year in the seasonally adjusted series.
The industry, in turn, did not have a good year and its declining trajectory became increasingly evident over time, as it ceased to have exceptionally low bases of comparison. Manufacturing, quarter after quarter, seasonally adjusted, did not register a single positive variation and, compared to Q4'20, it was responsible for the most intense drop among the GDP sectors (-6.9%).
Fourth, even though it grew in 2021, the Brazilian economy lagged behind in the global context. In 2020, when our GDP fell, it did not differ much from the evolution of global GDP: respectively, -3.9% and -3.3%, according to the average estimates of the main multilateral agencies in the world (IMF, OECD, UNCTAD and World Bank). In 2021, in contrast, we grew 1 percentage point less than the total world economy: +4.6% compared to +5.6%.
In summary, Brazil's GDP in 2021 expanded, but lost strength throughout the year—especially in the investment-industry binomial, essential to give consistency to the country's economic growth—, did not reverse the path of impoverishment of Brazilians and fell short of the recovery of the rest of the world.
But there is another bad news: in 2022, the discrepancy in the evolution of Brazilian GDP compared to the global economy is expected to widen significantly. The most recent projections point to Brazil's virtual economic stagnation, while world GDP is expected to expand this year, even under the negative effects of the war in Ukraine.
The projections of the Central Bank's Focus Bulletin pointed, at the end of last February, to a variation of only +0.3% for Brazilian GDP in 2022. With positive expectations for our exports of primary products, due to the conflict between Russia and Ukraine, this rate was revised to +0.5% in the last issue of the bulletin, in March 25 2022.
Even so, we will be far behind the rest of the world. In Jan'22, the IMF projected an increase of +4.4% for global GDP in 2022 and the World Bank, of +4.1%. These forecasts should be revised downwards with the escalation of the geopolitical tension in recent months. In Mar'22, the OECD and UNCTAD announced a reduction of 1 percentage point in their outlooks for this reason: to +3.4% and +2.6%, respectively.