In November last year, DailyInvestNews published a few opinion pieces discussing Brazil’s economic recovery and then 3 Reasons Brazil’s Record Unemployment is Not a Cause for Panic.
At the time, Brazil had seen half a year’s growth in continual GDP increases, and despite record unemployment which culminated in a quarterly decline, there was a lot to cheer for in the Brazil economy.
However, fast forward nearly six months and there is a lot less to cheer for in the world’s twelfth largest economy. Figures released this week showed just how badly COVID has affected and continued to affect the Brazilian economy.
Brazil’s Unemployment on the Rise
Figures from statistics agency IBGE showed that unemployment in Brazil increased in January for the first time in four months. The number of Brazilians officially unemployed in the three months to January increased to 14.3 million from 14.1 million in the three months to October. The latest unemployment figures are up 20% from the same time last year.
The total was up 13.9% from the three months prior and is nearing its record 14.6% seen in the third quarter of 2020. The latest unemployment figures were also higher than analyst expectations for a slight increase to 14.2 million.
Brazil’s Industrial Output in Surprise Decline
In other Brazilian economic news this week, Industrial production declined in February for the first time in 10 months. The surprise decline adds further weight to the growing view that Latin America’s largest economy contracted in the first quarter of the year.
According to statistics agency IBGE, February saw a 0.7% decline in industrial output which was considerably lower than analysts’ estimates for a 0.4% increase. The year-on-year rise was 0.4%, which was also well below analysts’ estimates for 1.5% growth.
The COVID Effect and a Bleak Outlook
Brazil is currently being hammered by a second wave of the COVID-19 pandemic. More 67,000 deaths in a month have triggered renewed lockdowns making the immediate outlook for Brazilian industry and the wider economy look a lot bleaker.
Whilst thousands of Brazilians are dying daily of COVID-19 and the economy is struggling, opposition to President Jair Bolsonaro is growing too. Bolsonaro’s drive to tighten the purse strings is not proving popular in a worsening political storm.
William Jackson, chief emerging market economist at Capital Economics said:
“With the surveys for this month deteriorating and car plants shutting amid the latest COVID-19 outbreak, the data for March and April are likely to be worse still,”
“Overall, the risks to our 3% GDP growth forecast for this year increasingly look skewed to the downside,”
William Jackson
In the Forex markets, the situation for Brazil is bleak too. The Brazilian Real lost approximately 10% in the first three months of the year. It recently revisited its record closing low of 5.88 per U.S. dollar set last year and more downsides are expected.
The Brazilian government’s poor handling of the COVID crisis has hit the country hard. Politically and economically, the pandemic has devastated Brazil. With a slow vaccine roll out and further political trouble brewing, the negative turnaround in the Brazilian economy looks like continuing further.
