The covid-19 pandemic, in addition to a huge human and social scourge for the whole world, also has very serious consequences for the world economy, generating a recession whose depth will depend on the extent and magnitude of its effects.

The impact on economic activity in Brazil should imply a contraction of the Gross Domestic Product (GDP) of the order of at least 5%. Everything will depend, in addition to the extent of the pandemic, mainly on the boldness, agility and effectiveness in adopting policies and measures in counterpoint to the crisis.

In this sense, some aspects must be considered, especially that well before the recent situation, our economy was already showing a continuous stagnation. In the accumulated 2017-2019, GDP per capita grew by more than just 0.3% per year, after the accumulated 6% drop in 2015-2016. And investments, measured by Gross Fixed Capital Formation, are at a level about 25% lower than in 2014.

The increase in our dependence on the production and export of commodities, or products of low complexity and added value, catches us in the current crisis, because there is not only a drop in international demand, but also in prices. Especially crude oil, iron ore and steel products are experiencing sharp price declines.

In addition, we have also become dependent on parts and components produced in regions of China that have been heavily affected, harming Brazilian production. The increase in uncertainty exacerbates the volatility of the markets, with impacts on interest rates, exchange rates and stock exchanges. The crisis has also caused a drop in revenue for exporting companies. These combined effects promote a postponement or even cancellation of new projects, investments and contracts, deepening the contraction.

Given this scenario, the adoption of a set of countercyclical policies and measures by the State is essential. For Brazil, especially, because of our extreme regional and income inequality, in addition to the vulnerability of millions of citizens, these measures are even more crucial.

The first aspect is that it is necessary to guarantee resources to expand the capacity of health care. The advance of the pandemic will require an extraordinary effort to reduce mortality.

It is also essential that the complementary basic income program reaches the most exposed portion of our population quickly, such as those on the street, informal workers and the unemployed in a broad sense.

There is scope for further reduction in the basic interest rate of the economy (Selic). The meeting of the Monetary Policy Committee (Copom) that takes place today and tomorrow should take advantage of the opportunity and promote a substantial reduction.

It is also essential to expand credit and financing for companies and families, but under much more favorable conditions than the current ones.

The policies to be adopted entail a cost of the order of R $ 700 billion (10% of GDP) per year. There is obviously no room for this in the Budget, and it will be necessary to expand monetary issuance and public debt to meet expenses. It is an expressive amount, but not doing so would mean a much higher economic and social cost, due to the deepening of the depression and its effects, such as the collapse of companies, the increase in unemployment and the collapse of income and, also, tax collection. , generating a strong negative fiscal impact.

Facing the crisis requires breaking paradigms, which, together with good management, will be decisive to mitigate its effects. The opportunity presented is to take advantage of the devaluation of the real to create programs to stimulate reindustrialization / productive conversion to supply our needs and also create more opportunities for employment and income.


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