Brazil’s unemployment rate is expected to be among the highest in the world by 2022

RIO DE JANEIRO, BRAZIL – Based on the latest IMF report projections, Austin Rating’s survey shows that unemployment in Brazil should be well above the global average, the emerging economies, and the G20.

Brazil’s unemployment rate is expected to be among the highest in the world in 2022, according to a survey by risk rating agency Austin Rating, based on the International Monetary Fund’s (IMF) new projections for the global economy.

In the ranking, which includes IMF projections for a group of 102 countries, Brazil appears with the 9th worst estimate of unemployment in the year (13.7%), well above the global average forecast for the year (7.7%), the emerging countries rate (8.7%) and is the second-highest among G20 members – behind only South Africa (35.2%).

The average unemployment rate in Brazil in 2021 was 13.2%, against 13.8% in 2020, according to data released by the Brazilian Institute of Geography and Statistics (IBGE).

Austin’s survey shows that Brazil registered the 16th worst unemployment rate globally in 2021. In the previous year, it had been in the 22nd position in the ranking.

The agency makes a less pessimistic projection than the IMF for Brazil’s unemployment in 2022. It estimates an average rate of 13%, which would place Brazil in 11th position in the ranking.

“Even if the statistic has some adjustment, the reality doesn’t change. It will still be a lamentable position”, says the chief economist of Austin Rating, Alex Agostini, author of the survey.

Other emerging countries have rates forecasted at much lower levels. The projection for China, for example, is an unemployment rate of 3.7% in 2022. For Russia, which is at war, the estimate is 9.3%. In South America, in Argentina (9.2%) and Chile (7%), the unemployment rate is also lower.

“When we take those countries directly comparable to Brazil, such as Greece, Peru, and Argentina, they all have a better perspective,” says Agostini.

Since 2016, unemployment in Brazil has exceeded two digits. The lowest in the IBGE’s historical series was recorded in 2014, which was 6.9%.

WHAT WEIGHS ON THE OUTLOOK FOR BRAZIL

In its latest report on expectations for the global economy, the IMF began to project a rise in Brazil’s GDP (Gross Domestic Product) of 0.8% this year – a more optimistic performance than that expected by the Brazilian financial market, which currently estimates an advance of 0.65%. At the same time, the IMF started to forecast an inflation rate of 8.2% in Brazil in 2022.

The IMF report does not make a specific analysis of the Brazilian economy but highlights that the Central Bank increased the basic interest rate (Selic) by almost ten percentage points last year, “which will weigh on domestic demand.”

Despite the drop in unemployment in the country by 2021, the labor market’s recovery has slowed down in recent months, with the growth in the number of employed showing interruption.

In the analysts’ view, unemployment tends to remain at high levels in 2022 amid persistent inflation, interest rates still on an upward trajectory, families’ income in decline, and uncertainties related to the country’s fiscal situation and electoral dispute.

The market, however, has a less gloomy forecast than the IMF. Itaú, for example, this month revised its projections for the unemployment rate from 12.7% to 12.2% at the end of this year and from 13% to 12.8% at the end of next year.

On the other hand, LCA Consultores estimates a rate of around 11% this year. “The labor market scenario in 2022 will depend on economic activity, unlike what happened in 2020 and 2021, when it was more tied to the health scenario,” says economist Bruno Imaizumi.

“We started the year with the unemployment rate at a level observed pre-pandemic. We project an increase of 3.75 million more people employed by 2022, but this will not cause the unemployment rate to fall because we also expect many people to start looking for work again,” adds the LCA economist, noting that the unemployment rate for the quarter ending in February was 11.2%.

Despite the worsening prospects for global growth in 2022, due to the war in Ukraine and the price shock worldwide, especially for energy and fuel, the slower recovery of the Brazilian economy mainly reflects domestic problems accumulated in recent years, such as low competitiveness, few productivity gains, and successive economic crises.

Agostini points out that Brazil’s average annual GDP growth was 0.4% over the last ten years, well below the 3% global average, 3.5% of the Brics, and 1.2% of developed countries.

“Brazil grows little and has a huge need. The fiscal problem has kept investment away, been a concern, and fostered more inflation and high interest rates,” says Austin’s chief economist. “We are stumbling on our own legs. The domestic problems overlap with the external problems.”

It is worth remembering that the IBGE considers only the workers who effectively looked for a job in the last 30 days before the survey as unemployed to calculate the country’s official rate. In addition to the 12 million unemployed, Brazil currently has 4.7 million unemployed people able to work but who have temporarily given up looking for a job, and 6.6 million underemployed due to insufficient hours worked.

With information from G1