RIO DE JANEIRO, BRAZIL – “The Brazilian economy has greatly improved and growth is likely to reach 5.3% this year,” said the World Bank’s chief economist for Latin America and the Caribbean William Maloney, recalling that in 2020 economic activity in Brazil shrank by 4.1%.
“It is important to emphasize that the region in general, and including Brazil, was not performing well before the crisis,” the chief economist added while pointing out that political uncertainties can affect investments and, consequently, the economic growth of any nation.
Despite the improvement compared to the past few months, the growth perspective for the Brazilian economy fell short of the projections for Latin American and Caribbean countries as a whole, which the World Bank estimates should grow by an average of 6.3% this year – mainly due to the acceleration of vaccination against the novel coronavirus and the drop in deaths from Covid-19.
In 2022 and 2023, the Brazilian Gross Domestic Product (GDP) should grow by 1.7% and 2.5%, respectively – also lower than expectations for all of Latin America and the Caribbean, which the institution estimates will grow 2.8% in 2022 and 2.6% in 2023.
“We need to focus on long-term structural problems. As well as reducing uncertainties in the short term,” Maloney proposed while detailing the semi-annual report in which the World Bank presents an economic outlook for the entire region, with an emphasis on the post-pandemic outlook.
“The good news is that with the increased pace of vaccination and the reduction in the number of deaths from Covid-19, the region is slowly emerging from the crisis and growing again. Nevertheless, and with some sectors emerging, recovery is still weaker than we expected. The projected regional growth of 6.3% is insufficient to offset the 6.7% slump in 2020, reactivate economies, and reduce poverty. Some countries are growing more, others less, but on average we are still not recovering what has been lost,” Maloney said.
In the report, the World Bank states that on a regional average, poverty rates (measured by a per capita household income of up to US$5.50 a day) have increased from 24% to 26.7% across Latin America and the Caribbean. This represents “the highest level in decades.” In part due to the “devastating” social costs of the pandemic.
“Students in the region have lost 1 to 2 and a half years of learning, and the drop in the UN’s Human Development Index [HDI] has exceeded that seen during the 2008 global financial crisis. The good news is that the vaccination campaign has been gaining momentum in the past 6 months and, although still far from the desired levels, has already led to a reduction in deaths from Covid-19 in most countries,” the report emphasizes.
According to the World Bank, in addition to vaccinating the population to prevent the emergence of variants of the novel coronavirus, the world must contain global inflationary pressure and high levels of private sector debt, address any uncertainties regarding the soundness of the banking sector, and focus on the growing budget deficit and the increase in public debt due to investments that governments had to make to protect families and businesses during the pandemic.