Vaccine helps GDP and employment, but energy, inflation and interest hinder

The advance of vaccination encourages a safe reopening of activities in the economy, opening up space for greater consumer circulation and reducing restrictions on the work of businesses, especially in trade and services. Economists, businessmen and governments say they are more confident in rehiring workers.

Despite helping the Brazilian economy, vaccination alone does not guarantee a boost to the gross domestic product (GDP), economists highlight. In their view, the biggest opponents of growth are the water crisis, inflation, rising interest rates and production bottlenecks. Together, these factors could erode part of the positive stimulus that immunization gives economic activity for the rest of the year and into 2022.

Without vaccination, resumption in 2020 would not continue

Optimism about vaccination is reflected in the GDP forecast. In January, when the immunization began, economists expected 3.5% growth this year, according to analysts interviewed by the central bank in report card to focus. At the end of September, with the majority of the adult population vaccinated with at least one dose, the bets are on even greater growth, from 5.04%.

to Vinicius Lummertz, the minister of tourism and travel in the state of São Paulo, was expected to resume last year, when the number of virus cases and deaths in the country was declining. But a second wave came, and the recovery did not hold.

He lost the end of 2020 resume later because everything shut down. The difference from the appeal now is that we have the vaccine. Now it is solid.
Vinicius LummertzMinister of Tourism and Travel of the State of Sao Paulo

Trading people prefer to work

The sectors that benefit most from vaccination are those that depend on the movement of people and on-site consumption and that have difficulty using digital commerce: bars, restaurants, beauty salons, barber shops and travel and tourism companies, corporate event companies, as well as informal activities, from street vendors to service providers.

Activities integrating service sectors are also the most employable, accounting for 51% of the country’s working population, and which have the largest weight in the economy, equating to 62% of GDP in the second quarter, according to the IBGE (Brazilian Institute of Geography and Statistics).

Economist Fausto Augusto Jr., technical director of Dieese (Department of Statistics and Joint Social and Economic Studies), says that informal work, which represents about 40% of the working population, directly benefits from vaccination.

The Ministry of Economy , in the report, he says: “Mass vaccination has contributed to the safe resumption of activity and thus employment. In the process, there is an improvement in services and trade, which have been severely affected by the epidemic.”

Unemployment rate It fell from 14.7% in the quarter ending in April to 13.7% In the quarter that closed in July, the number of unemployed fell by nearly 700,000. The working population increased 3.6%, in a quarter or seven million people a year, to 89 million workers, according to the latest data from the International Institute for Statistics and Information.

But the level of unemployment remains high, with 14.1 million people in the workforce.

Live trade for the end of the year

In retail and sales in July rose 1.2% Compared to June, the fourth positive result in a row, according to the International Institute of Statistics.

With more people trading and vaccinating, commerce is bullish on year-end sales, both among street retailers and between malls.

The head of Alshop (the Brazilian Association of Shop Owners), Nabil Seiyun, says the sector’s sales at the end of this year may exceed its pre-pandemic performance.

The forecast we had months ago was not good, but we see that as the vaccination progresses, sales are reacting very well. Given that by November we may have more than 90% of the population vaccinated with a second dose, we see scope for better year-end sales than in 2019.
Nabil Sahyoun, President of Al-Shoub Company

However, the coordinator of the Ibre FGV Trade Survey (Brazilian Institute of Economics in the FGV), Rodolfo Tobler, highlights that despite the epidemic’s control, there are other factors affecting trade, which were presented by By 3.1% in August. He cited inflation as one of those obstacles.

See below what could hinder economic growth even as vaccination progresses.

Travel is approaching pre-pandemic performance

The same is happening in the travel and leisure sector, as entrepreneurs in this sector point out.

In the domestic market, where restrictions have been relaxed almost completely, sales are growing at an average of 20% per month, compared to the previous month. In the international segment, where there are still restrictions from countries that are waiting for a greater immunization of the Brazilian population, the recovery is slower.

People who have been vaccinated feel more comfortable planning and buying trips. This became apparent when every age group was vaccinated, first, we saw greater demand from people over 60 years of age. Then, those over 50 years old, and today we see more demand from people over 30 years old.
Roberto Nedelchio, CEO of Braztoa (Brazilian Association of Tour Operators)

The second wave of Covid has caused a sharp drop in sales of flights through May, says the president of Abear (Association of Brazilian Airlines), Eduardo Sanovic. Since then, with the acceleration of vaccination, the air network has begun to grow month by month, and should remain so until the end of the year, when the sector will occupy 90% of the operations that existed before the pandemic. Much higher than 9.1%, the percentage of the sector at the worst moment of the crisis, in the first quarter of 2020.

Indirect impact on construction and industry

According to data from Cbic (Brazilian Chamber of the Construction Industry), real estate launches grew 114.6% in the second quarter and sales expanded 61%, but the final supply fell 7.1% to 180,007 units.

In industry, the director of economic analysis at CNI (National Confederation of Industry), Marcelo Azevedo, says the effect of vaccination is indirect. With the growth of consumption in commerce and the need to replenish the stock of storekeepers, the demands of the industry tend to increase.

growth impediments

But optimism about vaccination could be thwarted by a host of problems crippling the economy.

By grafting, we get the goats out of the room, but we return to our other problems.
chairs de Souza CaesarProfessor at FAAP (Armando Álvares Penteado Foundation)

The main factors are:

The main danger to our scenario at the moment is the hydrological crisis.
solange pleasure, chief economist at attributed to him Swiss

Water shortages and increased energy have already increased the costs of the entire productive sector. This means more inflation, which in turn represents a greater need for the central bank to raise interest rates. High interest affects consumption and investments. In Credit Suisse accounts, for every 5% drop in reduced energy consumption, the economy grows 0.6 percentage points less.

Inflation reduces income mainly for families with minors. can Acquisition, which represents the majority in the consumer market, affects the entire economy.
Juliana disgrace, economist and professor at Insper

More expensive energy drives inflation higher, but other factors also drive prices up. Inflation reduces companies’ profit margins, which ultimately results in them having less money to invest and hire. Higher prices also affect families.

To contain the rise in prices and bring inflation back within the target, BC quickly increased its base interest rate, Selic. But this remedy has a side effect, and it is precisely the slowing down of the economy, as highlights by the President of Cofecon (Federal Council for Economics) and Professor at PUC-SP (Pontential Catholic University of São Paulo), Antonio Correia de Lacerda.

Sales growth in the second quarter was higher were it not for bottlenecks in the supply of inputs and raw materials, which are already driving up costs and affecting the pace of construction.
Jose Carlos Martins, President Cbic

The interruptions in industries during the pandemic in Brazil and in the world have increased the demand for raw materials and inputs, which are lacking in various sectors of the economy, from civil construction to the manufacture of cars and household appliances.