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Effects Of The CoronavíRus (COVID-19) On The Expectations Of Economic Activity In Brazil

Jul. 08, 2020 7:42 AM ET
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Seeking Alpha Analyst Since 2020

I'm Corporate Attorney, Economist, Judicial Expert and Writer of Capital Markets and Economy. Moreover, I'm M.D. on Economy and Markets at Mackenzie Presbiterian University, and Mastering Degree on Tax Law at Foundation Getúlio Vargas (FGV).


  • Impacts of the coronavirus on the Brazilian economic activity;
  • Increase in default levels with weak economic activity; e.
  • Falling expectations of the resumption of economic activity and consumption.

This article presents how COVID-19 strongly impacted consumer and business expectations, as economic activity was on the rise following the dark period of the impeachment of ex-President Dilma Rousseff, as shown in the graphs below:

As can be seen in the graph above, COVID-19 brought a strong negative economic impact on the development of economic activity, which was confirmed by the -0.38% deflation in May / 2020, according to data obtained from IBGE.

In view of the weak economic activity given the uncertainty regarding the resumption of economic activity, companies had to take immediate measures to minimize the impact on their activity, resulting in the dismissal of their employees or the use of alternative measures granted by the Federal Government through MP n . 936/2020, reducing working hours and wages for up to 90 days, or suspending employment contracts for up to 60 days.

This scenario of uncertainty increased the levels of consumer defaults (red line), surpassing the forecast of a drop in default (blue forecast line):

Legend: forecast to financial default on Brazil. 

Therefore, there is a worsening of economic activity due to the effects caused by the coronavirus (COVID-19), since the expectations of companies and consumers were affected due to the economic recession, whose scenario resulted in an increase in household indebtedness, in addition to compromising the ability to subsist due to the difficulty of consuming essential goods (basic food basket).


Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

NOTE: this study analyzed the period from March/2012 to April/2020, when all data were available on the ipeadata website, usingas a proxy consumption data on basic food baskets in São Paulo - Brazil.

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