Depression, not recession, might be on the horizon — and the recovery will not be swift. The soap-opera around Jair Bolsonaro’s Covid-19 comes to an end. And the increasing coronavirus curve.
High debt levels prevent V-shaped recovery for Brazil
The Covid-19 pandemic is set to push Brazil into its worst recession on record, and the Economy Ministry believes that the high debt levels of both companies and the government will prevent any form of V-shaped recovery — foreseeing the effects of the crisis lasting at least until 2022. The government — which is usually the last to abandon optimism — has now joined consensus and predicts a negative GDP growth rate for the year: -4.7 percent.
- The base scenario for this forecast involves isolation measures being enforced beyond May 31, when many quarantine decrees are set to expire. This is a reasonable prediction, as governors of São Paulo and Rio de Janeiro are not ruling out full-scale lockdowns unless social isolation rates increase soon.
Why it matters. According to a study by The Economist Intelligence Unit, the Brazilian economy will be affected the most by the Covid-19 crisis, out of 19 countries analyzed. Government officials fear this could spark social unrest and a...