It’s not Groundhog Day — it’s another crisis in the federal government. The drop in productivity caused by the pandemic. How inflation has a larger effect on the poor.
Pandemic slashes Brazilian productivity
The productivity level of the Brazilian economy dropped 1.7 percent in Q1 2020 when compared to the same period last year. This is the sharpest drop since a 2.5-percent fall in Q4 2015 — when Brazil was in the middle of what was then its worst recession on record. The situation is only expected to get worse, however. As social isolation measures were only implemented late in March, they had a reduced impact on Q1 — the drop in productivity during Q2 should be brutal.
Why it matters. Brazil has passed the period of the so-called “demographic bonus,” that is, when young people of working age far outnumber older populations. Therefore, a sharp increase in productivity is the only way to increase per capita income over the next few decades.
Slow pace. While the pandemic is set to aggravate Brazil’s productivity problem, the issue predates the coronavirus. Productivity levels have advanced very slowly since the 1980s and had a massive drop during the 2014-2016 crisis.
- The drop...