GDP in the Second Quarter and Growth in 2022
The contraction of 0.1% in GDP for the second quarter of 2021 has left a carry-over of 4.9%, meaning that modest recovery in the third and fourth quarters should lead to yearly growth near our projection of 5.2%. However, the outlook for 2022 is very different. It is already possible to envision deceleration of Brazilian exports due to the worse performance of the volume of global trade (slower growth in the USA and Europe) and the reversal of the upward trend of international commodity prices (return of China to its potential growth).
These factors will be accompanied by tighter monetary policy throughout 2022. On the supply side, with manufacturing fluctuating (since the recession of 2014-16) at a subdued level, and still suffering the effects of the rupture of supply chains, growth will have to come from the service sector, counting on the benefit of control of the pandemic.
On the demand side, household consumption will suffer the constraints of still high unemployment, high indebtedness and lower per capita income, while gross fixed capital formation will continue being strongly affected by the uncertainty provoked by the political and fiscal risks. Finally, in formulating the scenarios for 2022, it is not possible to ignore the possible aggravation of the water crisis, causing growth below 1.5%.
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