Synthesis of the Brazilian economy
The new coronavirus has already infected at least 1.2 million people in the world, with 64 thousand deaths and 244 thousand people classified as recovered, according to data up to April 4th. The numbers are imprecise due to the different testing strategies adopted in countries and regions. China, where the COVID-19 virus originated, has reportedly contained the first and second contagion waves, and has reported a number of infected people (82 thousand) significantly lower than the United States (300 thousand), Italy and Spain (125 thousand each), and Germany (92 thousand). The contagion rates vary according to the start of the outbreak and the control strategies adopted. They are already declining in Italy and Spain, but accelerating in the United States and United Kingdom. So far Brazil’s performance has been better than the majority of other countries mentioned, indicating that the social distancing strategy adopted in the middle of March has been working.
Social distancing provokes economic costs, but they would be even worse if the option were to “let nature run its course”. They should be counteracted by coordinated fiscal and monetary policy actions, with the aim of guaranteeing that sufficient resources are available to run the public health system, support the less favored contingent of the population and those most affected by unemployment, and preserve efficient companies in conditions for full functioning as soon as the quarantine is relaxed. However, Brazil and the rest of the world will not escape from a deep recession, and the recovery will be slow instead of a sharp turnaround. Brazil’s fiscal situation was already fragile before the arrival COVID-19, and will be worse when the outbreak is surpassed, demanding redoubled effort to put the accounts in order via more ambitious reforms.
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