With the growth in the number of cases of coronavirus in the world, including a newly discovered case in Brazil, concern has increased about the effects of the epidemic on the economy.
Understand how the advance of the coronavirus can affect the Brazilian economy. For this, it is important to realize that there will be a reduction in growth all over the world, even though the dimension of such reduction is not yet known. In Italy, for example, with the recent 11 deaths caused by the virus, there is a forecast for a drop of 0.5% to 1% of GDP this year.
What is analyzed is that hardly any country will go through the crisis unscathed. Brazil, which has China as its biggest export customer, should be directly affected by the impacts of the disease.
China, the country where the virus was first discovered and the epidemic started, is Brazil's biggest export customer. Last year alone, 30% of everything the country sold abroad went to the Chinese. Which are our biggest buyers of soybeans, oil and iron ore.
The problem for the Brazilian economy is the paralysis of the Chinese economy, which due to the growth of the disease across the country had to close its various factories.
There is still no proportion to the size of the hole that this will cause in the Chinese economy. But there are already those who are already showing signs of negative GDP in the first quarter of 2020 and a drop of more than one percentage point in expected growth, which was around 61TP3Q).
Less export to Brazil
With the Chinese economy in decline, the number of purchases of Brazilian products will decrease and this will impact large export companies such as Petrobras, Vale and several companies in the food industry. Since the disease began to affect global financial markets in January, oil, soy and iron ore prices have dropped significantly. All corresponded to 78% of Brazil's foreign sales in the year 2019.
For Brazil, which also imports various raw materials and inputs from China, will soon feel the impact of the closure of factories in the Asian country. Manufacturers of electronics, car assemblers, and medicines, are some of the sectors that are affected by the lack of products due to factory closures.
Technology branch will feel more
According to an expert, the greatest loss and risk is for cell phone and IT item manufacturers. Since these are the ones with the lowest stock of these components. But it also poses a threat to the automobile industry, which uses a lot of on-board electronics.
A scenario of lower foreign sales and production in factories due to the lack of inputs will consequently have an impact on the country's economic growth.
Brazil started 2020 with optimistic projections that pointed to economic growth around 2.5%. A big jump compared to highs of around 1% over the past three years. But poor indicator results at the end of 2019 have already pushed these forecasts back to around 1.5% according to BNP Paribas bank. If it turns out that the coronavirus continues to bring down economies around the world, estimates for the Brazilian GDP are likely to fall even further.
