Brazil’s Central Bank says incentives should sustain economic recovery

RIO DE JANEIRO, BRAZIL – The statement was made in the first quarter Regional Bulletin, released this Thursday. Monetary stimulus, the return of government measures, and the reduction of pandemic impacts are among these incentives.

The Central Bank (BC) said that in the short term a range of incentives “should sustain the recovery” of economic activity “at national level.” The statement was made in the first quarter Regional Bulletin, released on Thursday.

Among these incentives are: monetary, “despite the partial SELIC normalization process;” resumption of government measures; reduction in the impacts of the pandemic, “also as a result of the ongoing vaccination.”

“Recent indicators show a more positive development than expected, despite the intensity of the second wave of the pandemic being greater than anticipated. Overall, the several first quarter reports were a positive surprise, signaling the resilience of the economic recovery process against the impacts of the worsening of the Covid-19 and the reduction of government measures to mitigate the economic impacts of the pandemic,” said the monetary authority.

In the document, the Central Bank also emphasized that the regional analysis “highlights the significance of the agribusiness and mining sectors in sustaining growth.

Overall, “uncertainty about the pace” of growth in Brazil “is still higher than usual, but should gradually return to normality.”

The pandemic “has sustained the de-concentration trend” of formal employment across the country, “pointing to a more favorable employment trend in regions with a lower number of formal workers,” as shown in the Central Bank’s Regional Bulletin.

According to the monetary authority, “in the most acute phase” of the crisis, “smaller regions registered fewer net dismissals and, in the following months of recovery, more net hires.” This “greater dynamism” in less populated regions “may be associated with wider coverage of public policies – such as emergency aid – and potentially fewer constraints on the operation of economic sectors.”

To conduct the analysis, regions were divided into 3 groups, according to the population living in each: group 1, formed by regions with more than 3.5 million inhabitants; group 2, with a population between 1.5 and 3.5 million; group 3, with a population of up to 1.5 million. In simplified terms, all regions have a little more than 30% of the country’s population.

In the case of commerce, for example, there has been an “acceleration of geographic de-concentration among these three groups.”

“While formal employment in group 1 has not yet recovered the pre-pandemic level (average between January and February 2020), groups 2 and 3 are up about 3% and 4%, respectively,” the Central Bank says.

In the case of household services, the formal employment comparison shows “a less pronounced drop” in group 3, “followed by gradual recovery.”

“In the larger regions, the recovery is not consistent and, specifically in the month of March, employment suffered greater impact from the second wave of covid-19, reflected mainly in accommodation and food,” it says.

Technical and administrative services, on the other hand, “more associated” with companies, maintain a “de-centralization trend.” In this case, formal employment is above the pre-pandemic level in groups 1, 2 and 3: respectively 3.0%, 5.5% and 8.9%.

Finally, “manufacturing employment in group 1 performs below those in groups 2 and 3.”

“The greater dynamism in the less populated regions may result from the greater relative share of manufacturing branches that were considered essential activities – such as the production of food, beverages and clothing,” it says. “In construction, a more uniform evolution is noted, which may reflect the fact that the activity has been considered essential in most locations in the country.”

Source: Valor Investe