Brazil’s 2015 recession will cost about US$ 60.2 billion (R$ 240 billion) to the country. The amount refers to a big number of agricultural and industrial goods like cars, machines, shoes, clothes etc. that were not produced and services that were not provided such as medical appointments, bank transfers and visits to beauty salons.
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The consequences of such a decrease in production are unemployment and fewer investments. By November, unemployment had reached 7.5%, compared to 4.8% from the same period last year.
The calculation for the cost of recession was made at the request of this newspaper by Zeina Latif, chief economist at XP Investimentos, based on the average GDP variation expected today by market analysts: a drop of 3.7%.
To show the 2014 GDP at current prices, the economist has corrected the figure published by the Brazilian Institute for Geography and Statistics IBGE (R$ 5.69 trillion or US$ 1.43 trillion) using the GDP deflator, which was 8% on average.
At today’s prices, Brazil’s GDP may fall to US$ 1.609 trillion (R$ 6.418 trillion) in 2014 and US$ 1.551 trillion (R$ 6.188 trillion) in 2015.
“In fact, Brazil wasn’t this wealthy in 2014. The money in Brazilians wallets wasn’t enough to pay for the gas, energy and dollars consumed, because everything was subsidized,” says Francisco Pessoa, a LCA consulting economist.
He believes the recession results from the correction of prices that remained frozen during the election year and the fiscal adjustment implemented to amend the government’s mistake of spending more than it has acknowledged.
According to Latif, this year’s recession was inevitable due to all the mistakes in last year’s economic policy, but its intensity was not known.
The economist believes the situation worsened because the government could not implement the fiscal adjustment and was downgraded to junk by rating agencies. The political crisis also brought uncertainty to investors.
“It’s like a cancer patient who stops therapy before healing and is even more fragile. Next year, the situation can be even worse,” says Latif.
Analysts have no doubt that the effects of the 2015 recession will be seen in 2016. They believe the GDP will drop by 2.8% (average). If confirmed, there will be over a hundred billion dollars lost.
To Latif, it can be the same as this year: 4 percent, as there is little chance of implementing the fiscal adjustment and structural reforms.
Pessoa does not think that next year’s recession of will be over 3% because most administered prices were adjusted and the devalued real will boost exports.
“But I have to recognize that at the beginning of this year I didn’t imagine such disaster. Anything is possible,” he says.
