RIO DE JANEIRO, BRAZIL – The National Confederation of Industry (CNI) recently released its economic report in which it revised its estimate for the gross domestic product (GDP, the sum of goods and services produced in the country) this year from 1.2% to 0.9%.
According to the new estimates, the company also reduced its economic forecasts for the industry, which is expected to produce 0.2% less this year than in 2021. In December, CNI calculated a growth of 0.5% this year.
“If this scenario is confirmed, it would be the seventh time in 10 years that the national industry has contracted,” CNI stressed in a statement.
Among the reasons for the revisions are the difficulties faced by globalized production lines due to the ongoing war in Ukraine and the unprecedented sanctions imposed on Russia by the West, which has put upward pressure on international freight prices due to high oil prices.
Another factor is the Ômicron variant of Covid-19, which continues to affect production in China, a country with a zero-tolerance policy toward the virus and quarantines entire cities.
“The trade and financial sanctions imposed on Russia by several Western countries and the new variant of Covid-19 have contributed to the continued disruption of production chains,” CNI said.
The agency also cited the decline in real income, which has shrunk due to high domestic inflation, and the resulting high-interest rates, making it challenging to purchase durable goods such as cars and household appliances, as other factors behind the drop in the GDP estimate.
“We are facing the increasingly difficult challenge of high inflation with low growth,” stressed Mário Sérgio Telles, head of the CNI’s economic department.
Among the hardest-hit industries is manufacturing, which produces consumer goods and whose GDP is expected to end this year with a 2% decline, compared to last year’s 3.4% growth.
Difficulties in sourcing inputs and raw materials, as well as the decline in consumption, are both significant problems, according to the CNI.
One of the few beneficiaries of the international context is likely to be the extractive industry, which is expected to end the year with 2% growth due to the increase in prices of products such as oil and iron ore, although lower than last year’s 3%.