Brazilian Macroeconomic Overview – August edition

Withdrawing the stimulus, but without hindering the recovery

The world economy continues to recover, thanks to the combination of greater control over the pandemic and strong monetary and fiscal stimulus. In both areas, although the prospects are positive, there are many uncertainties and there are still various obstacles in the way.

Globally, since mid-July, the numbers of new weekly cases and deaths appear to have stabilized. At the level of specific countries, however, there are very different dynamics. In the poorest countries, such as India, the pandemic continues to spread, among other reasons because it started there later. In middle-income countries and especially advanced economies, the worst moment of the pandemic seems to be behind us. This helps explain why the pace and form of economic recovery have not been uniform across countries.

In developed countries, Europe is expected to soon present better results, as it is at a more advanced stage of the pandemic and the region has also stood out for its ability to trace and control new outbreaks. However, in some countries, such as Spain and Germany, the growth in new daily cases is worrying.

In the United States, GDP shrank 9.5% in the second quarter, compared to the previous quarter, and July’s high-frequency data shows that the economy is now losing steam due to outbreaks of the virus in many states. In recent weeks, however, there has been a slowdown in the number of new daily cases.

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