The recovery of economies has surprised everyone. I think it will continue to surprise you in the coming quarters.
The reason is that the economic crisis produced by the pandemic is of a totally different nature from a crisis that results from the very functioning of the economy.
In the great global financial crisis that broke out in September 2008, following the bankruptcy of Lehman Brothers, recovery was very slow.
For more than a decade, poor regulation has allowed, without further ado, the granting of mortgages to low-income Americans at high risk. When the economic cycle reversed, defaults in the American and European banking sector, which had also joined the party, were huge.
A crisis of this kind leaves permanent marks on the economic system. There is a permanent loss of product as a result of the misallocation of investment that has been in place over the years and the excess of indebtedness. When growth returns, it does so at a lower rate. the growth rate
pre-crisis was anabolized by poor regulation.
Similarly, if we look at the great Brazilian crisis of 2014-2016, there was a clear permanent loss of product. The misallocation of capital in the investment cycle under the leadership of the public sector over the nine years between 2006 and 2014 explains the permanent loss.
The political crisis and the difficulty in building consensus to overcome the fiscal weakness, which is with us until today, have made it very difficult to resume growth.
With the losses of the current crisis, it will be different. The exogenous factor that produced it, the virus, will be defeated by the vaccine. There is already a process of adaptation of the economic sectors to the virus: the reduction of mobility lessens economic activity than before the pandemic.
This fact became clear after the disclosure, by IBGE, of the activity in the first quarter: the economy, after three quarters of a “V” recovery, returned to the same point it was in the fourth quarter of 2019.
Recovery has been very heterogeneous. Some sectors run above pre-pandemic levels, such as agriculture, financial and real estate services, and the manufacturing industry, while the “other services” segment is pacing.
“Other services”, which represents 15% of GDP and just over 30% of employment, is still 10% below the level before the epidemic.
The item “other services” includes tourism, bars and restaurants, all entertainment and personal services. The social crisis will only subside if there is the normalization of other services, which, in turn, requires advances in the vaccination campaign.
My bet is that there will be normalization of other services in the coming quarters. And there will be a changeover from the transformation industry, which should reduce its activity sometime in 2022, to other services.
Thus, there is still plenty of room for the economy to recover. The 5% to 5.5% growth in 2021 will be followed by an expansion in the range of 3% to 3.5% in 2022. At some point in 2023 we will be in the same trend that existed before the virus arrived here. Then we will have to come to terms with our mediocrity again.
The book “How to Remove a President” by Rafael Mafei has just been published by Zahar. Very careful editing —beautiful index, notes and well-documented bibliographic references—, the book elaborates the experiences and legislation of impediment of a president in Brazil from the Old Republic to a possible impediment of Jair Bolsonaro, passing through the controversial process of Dilma Rousseff. I recommend.
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