The Central Bank cut its projection for the Gross Domestic Product (GDP) to zero in 2020, compared to a growth of 2.2% calculated in December, it could reach zero.
Thus, highlighting that the stability now seen is associated with “significant” economic impacts. Although arising from the coronavirus pandemic, according to the Quarterly Inflation Report published this Thursday.
GDP can reset
“Although additionally, results below expectations in economic indicators at the end of 2019 and beginning of 2020. Therefore, they affected the expected performance of the activity in the first quarter”, said the BC.
“However, in terms of trajectory, the projection for annual GDP considers a sharp decline in GDP in the second quarter, followed by a relevant return in the last two quarters of the year”, added the monetary authority.
The BC noted that there is a high degree of uncertainty in making projections in a crisis environment. He also said that the magnitude of the impacts of the pandemic on domestic economic activity will be associated with the severity and extension of the period of the outbreak in the country and the public measures that are being adopted in the various areas.
Zero savings?
Therefore, expectations were in line with those released last week by the Economic Policy Secretariat of the Ministry of Economy. Because it started to see a rise of 0.02% for GDP this year.
Regarding monetary policy, the BC reiterated its message that it is appropriate to maintain the Selic rate at its new level of 3.75% per year. However, the greater variance of risks and new information on the economic situation will be essential to define its next steps.
This information note aimed to assess the channels through which the Covid-19. Thus, by affecting the Brazilian economy, as well as providing estimates of impact on GDP growth in 2020.
In short, we emphasize that it is still too early to determine the impact. As more economic data from Brazil and the rest of the world are released, it will be possible to refine estimates and reassess the scenario.
Finally, we emphasize that the official GDP growth projections of the SPE take into account a wide set of models. This note was only intended to quantify, using an alternative methodology, the impact of a specific economic event.
