Water crisis contributed to third-quarter contraction, government says

The water crisis in Brazil is the worst in 91 years: the lack of rain has completely affected the agricultural sector. Photo: Lineu Filho / Tribuna do Paraná

The worst water crisis in the past 91 years was the main factor contributing to Brazil’s 0.1% drop in GDP in the third quarter, which put Brazil in what economists are calling a ” technical recession “, underlines the Ministry of the Economy. According to the Under-Secretary for Macroeconomic Policy, Fausto Vieira, the problem has caused agriculture to drop by 8%, the sector’s worst performance since the first quarter of 2012, according to the Brazilian Institute of Geography and Statistics (IBGE).

He said the sharp shrinkage contributed to a half a percentage point reduction in quarterly GDP. “Without it, we would have increased by up to 0.4% (the forecasts of the secretary for economic policy at the Ministry of the Economy).”

Vieira said the organization wants to better understand the reasons for the sharp decline in this sector. “Let’s talk to IBGE”. But he points out that one of the motivating factors was the decline in the maize harvest, which was 16.4% lower than in the 2019/20 cycle.

Another factor cited by economists as the reason for the slowdown in agriculture was the reduction in beef slaughter, prompted by China’s decision to suspend imports of the Brazilian product due to two cases of mad cow disease. “What was produced and sent had an impact on the GDP,” explains the Under-Secretary.

industry and construction

The industry, which has not performed well, according to IBGE data, has also stagnated. The rationale, according to Vieira, was that the manufacturing industry – which accounts for 54% of industrial GDP and has shrunk by 1% – has been hit by the global supply chain crisis. And the extractive industry, down 0.4%, was affected by the maintenance of oil platforms.

But he points to the good construction figures, which grew 3.9% from the second quarter of the year. “The employment figures show it.” In the year, there are already more than 284,000 new jobs, according to data from the General Register of Employees and Unemployed (Caged). That’s more than double the value recorded in the first ten months of last year.

Labor market recovery and GDP growth

Vieira recalls that there is also an ongoing recovery in the labor market. “We should have a big recovery among the informal in the next 12 months, there will be more than 3.5 million opportunities that will be opened. In total, there will be 5 million new jobs “, he quotes

He underlines that this segment has been one of the most affected by the pandemic crisis. “The informal sector is coming back, with that it will generate production and generate growth.” The Secretariat of Economic Policy expects Brazil’s GDP to increase by 2% next year.

The projections do not correspond to those of the financial market. The projections collected by the Central Bank from banks, brokers and consultants indicate a growth of 0.58%. They have been declining, in the Focus report, for seven weeks. And part of them are signaling a contraction in GDP in 2021.

Economy Minister Paulo Guedes said on Thursday that “to say that Brazil is not going to grow is just a mistake and a foolish speech”. The Undersecretary points to some of these investments: 5G and sanitation.

And, even with the central bank’s growing possibilities of raising the Selic, the base interest rate, to levels above 10%, Vieira sees the possibility of robust growth in 2022. “Inflation is happening. worldwide. “

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