Brazilians set for a nasty shock as economic crisis deepens

The Brazilian population has yet to realize the severity of the crisis set to hit the country in the next two years. The government’s emergency aid program helped to cushion the initial blow of the recession caused by the coronavirus pandemic, but the true colors of Brazil’s fiscal problem have yet to become clear to the average citizen. This is the view of political scientist Daniela Campello, a researcher and professor at think-tank Fundação Getúlio Vargas in Rio de Janeiro.

“The government’s [emergency aid program] forged a security blanket that sustained a lot until now”, argues Ms. Campello. But in a country with limited fiscal space in the medium term, there is little room for another spending spree to avoid a deep recession in 2021 and 2022 — when President Jair Bolsonaro will run for re-election. 

Since being implemented in April, the coronavirus stipend was distributed to more than 60 million people at a total cost of around BRL 322 billion (USD 64 billion). Meanwhile, Brazil’s 2020 deficit will reach BRL 779.8 billion, according to estimates from the Independent Fiscal Institute, linked to the Brazilian Senate.

The aid program changed...