Monday, August 12, 2019

' Preliminary ' of the Central Bank's GDP backs 0.13% in the 2nd quarter and indicates the beginning of ' technical recession '

The Brazilian economy recorded a retraction of 0.13% in the second quarter of 2019, according to the Economic Activity index (IBC-Br), a kind of "previous" of the gross domestic product (GDP), published by the Central Bank (BC) on Monday (12). The 0.13% retreat between April and June of this year was verified in the comparison with the first quarter of 2019. The number was calculated after seasonal adjustment, a "compensation" to compare different periods of one year. As the level of activity had already fallen 0.2% in the first three months of this year, against the last quarter of last year, the Brazilian economy may have entered into a "technical recession" – which is characterized by two quarters followed by tumble of GDP. According to explanations by the Brazilian Institute of Geography and Statistics (IBGE), the technical recession is considered the possibility of recovery in the short term. It is different from the recession in fact, when the situation of the country is deteriorating significantly, and there is high unemployment and the rates of bankruptcy, fall in production and consumption. The gross domestic product (GDP) is the sum of all goods and services produced in the country and serves to measure the evolution of the economy. The IBC-BR of the Central bank, however, is only an indicator created to try to anticipate the result of GDP – which is calculated IBGE. The official GDP figures for the first quarter will be released on August 29th. When the comparison is made with the result of the second quarter of 2018, however, the IBC-Br of the first quarter of 2019 indicates a high of 0.85% (without seasonal adjustment). In 12 months until June this year, also without seasonal adjustment, the numbers of the BC indicate an expansion of 1.08%. The weak result of the second quarter of this year was expected by economists. This is because the components of GDP had already indicated low activity in the period. The service sector, for example, recorded a decline of 0.6% in the second quarter, while industrial production fell by 0.7% and sales of trade declined 0.3%. Despite the retraction of GDP in the first three months of this year, and of the possible tumble also in the period from April to June, financial market economists, the Central Bank and the Ministry of Economics project Economic growth throughout this year. The forecast is high in GDP of about 0.8% in the year 2019. FGTS and pension reform After the fall of GDP in the first quarter of this year, the economic area of the Bolsonaro government began to move to stimulate the economy and, more recently, announced the release of R $42 billion of PIS accounts and the guarantee Fund for time of Service (FGTS) , with effect on 2019 and 2020. If all resources are withdrawn, the impact on GDP this year would be 0.26 percentage point and 0.59 percentage point next year, estimated the Independent Tax Institute (IFI), an organ linked to the Senate. That is, the release of money would add, in the two years, growth of 0.85 percentage point in GDP. In addition, analysts believe that the approval of the pension reform, in the first round by the House of Deputies, will also contribute to boosting the growth of the economy in the coming months. The logic is that investors will feel safer in investing and generating jobs in a country with the most tidy accounts. IBC-BR X GDP IBC-Br was created to try to anticipate the result of GDP, which is disclosed by IBGE. The results of IBC-Br, however, did not always show proximity to the official data of GDP. The calculation of the two is somewhat different – the BC index incorporates estimates for agriculture, industry and service sector, in addition to taxes. IBC-Br is one of the tools used by the BC to define the country's basic interest rate. With the lower growth of the economy, for example, theoretically there would be less inflationary pressure. Currently, the Selic rate is at 6% a year, in the minimum historical, and the market estimate is that it falls to 5% per year until the end of 2019.
G1 - 12/08/2019 News Item translated automatically
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