BRAZILIAN MACROECONOMIC OVERVIEW – AUGUST 2021 EDITION

Challenges for economic recovery

The world is entering a new phase, less frightening than at the height of the pandemic but less promising than in the first half of this year. This new phase has its own challenges. Overall, the international environment is still favorable for emerging markets, but less than in the first half, given the significant increase in volatility and uncertainty.

Following a robust recovery of economic activity in developed countries in the first half of the year, due to fis-cal and monetary stimulus policies together with extensive vaccination campaigns, we expect the pace of growth to fall back in this second half. Growth will be good but no longer spectacular.

This is borne out by FGV IBRE’s Coincident Global Economic Barometers,1 which recorded declines in July and August. This partly reflected the deceleration of annualized world economic growth rates in the third quarter of 2021, when the base period for comparison was no longer the weak second quarter of 2020. However, these indicators are still high and compatible with the continued worldwide economic recovery.

In terms of sectors, it can be seen that all five surveyed sectors contributed to the negative aggregate result, but industry made a particularly large contribution to the decline in August. Likewise, the industrial sector also significantly contributed to the downturn in the Leading Indicator, after having been the major player in the global economic recovery until mid-2021. In regional terms, the Asia, Pacific & Africa group performed the worst regar-ding both indicators.

According to the survey, the slowdown from the exceptionally strong pace of expansion is therefore likely to continue in the coming months. This trend will be reinforced by the worsening health situation in some regions and bottlenecks in the supply of various production inputs.

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Any opinions expressed by Fundação Getulio Vargas’s staff members, duly identified as such, in articles and interviews published in any media, merely represent the opinions of these individuals and do not necessarily represent the institutional viewpoints or opinions of FGV. FGV Directive No. 19 / 2018.