Brazil expected to post lowest growth among the world’s 10 largest economies – FGV study

RIO DE JANEIRO, BRAZIL – Brazil will post the worst economic performance among the world’s 10 largest economies, using the Purchasing Power Parity (PPP) criterion, which reflects the differences in cost of living among countries.

This is shown in a study commissioned by the report by economists Claudio Considera and Juliana Trece, from FGV Ibre (Brazilian Institute of Economics of the Getúlio Vargas Foundation), based on IMF (International Monetary Fund) data and projections released in April.

When considering the size of world economies based on PPP, Brazil should retain the 8th position in 2021 for the 3rd year in a row. In 2018, it ranked 7th.

In 2020, Brazil managed to reduce the distance to most countries ahead of it, except in relation to China and Indonesia, which performed better economically.

In 2021, the world’s 7 largest economies will outperform Brazil, according to IMF estimates, which are more optimistic than the Brazilian government’s.

Brazil should not drop positions in the ranking this year, should the projection be confirmed, but it will be close to being overtaken by France and the United Kingdom, currently in 9th and 10th place, which will also grow more in 2021.

The Fund projects 3.7% growth for Brazil this year. The Ministry of Economy, however, projects only 3.2%. The financial market estimate stands at 3.09%, according to the Central Bank’s Focus survey. The world average is for 6% growth, according to IMF projections.

According to the PPP criteria, China is the world’s largest economy, followed by the U.S. India, Japan, Germany, Russia, Indonesia, and Brazil. The PPC ranking time series was altered because of the upward revision of the Brazilian GDP for 2018 and 2019, improving the country’s placement in the list -initially, it was estimated that Brazil would drop in the ranking over these 2 years.

Last year, Brazil’s GDP fell by 4.1%, above the world average of 3.3%, in addition to a depreciation of its currency of about 30%, one of the worst international performances.

In 2021, the exchange rate should not depreciate as much. Last year, the dollar rose from R$4.03 to R$5.20. Market expectations point to a rate of R$5.40 at the end of this year.

“Even if the Real doesn’t depreciate as much this year, there will be lower growth than in the rest of the world playing against it, because we haven’t properly handled the pandemic,” says Considera.

According to him, even if the country has a “V-shaped” recovery, as the government claims, this year’s growth will not offset the 2020 losses, and even if it did, the country would return to the very low growth level seen between 2017 and 2019.

Ibre expects a GDP variation close to zero in the first quarter, which may be repeated in April and May, with a gain in traction in the following 3 months and a new deceleration starting in September.

“The second quarter will depend on how many people are vaccinated, because the most important economic sector, the service sector, depends on social interaction. Either the population is vaccinated or there is no social interaction”, says the FGV Ibre economist.

In addition to the PPP criterion, the Fund compares the size of the economies considering each country’s GDP value in dollars at current prices.

In this case, Brazil fell from 9th position occupied in 2018 and 2019 to 12th in 2020, being overtaken by Canada, South Korea, and Russia. The drop had been previously projected by an Ibre study released in November.

For 2021, the IMF projection shows that the country should lose one more position, to Australia, according to calculations by the FGV Ibre economists.

According to this criterion, the U.S. is the world’s largest economy, followed by China, Japan and Germany. Until 2014, before the recession started that year, Brazil was the 7th largest economy by this criterion.

IMF projections also show that Brazil has dropped in the global ranking of countries with the highest per capita GDP in 2020 and should continue to lose positions in the coming years.

Brazil’s drop in the per capita ranking has occurred at least since 1980, when the country was ranked among the 50 largest. In 2020, it ranked 85th among the approximately 195 countries for which data is available.