New year, old and new challenges

When analyzing the economy as a whole, the end of the year is always an opportunity to review what happened in the year that is ending and align our expectations for the new one.

Looking back, we see that the performance of the Brazilian economy was marked by two main traits in 2021. First, there was a recovery that proved to be strong in the first quarter, but it was very frustrating afterward, as there was a smaller-than-expected reaction to vaccination and partial control of the pandemic. Second, inflation was systematically higher than projected, as had already happened at the end of 2020, leaving the Central Bank well “behind the curve.” This will have major implications for the economic situation in 2022.

Early 2021, especially the second quarter, was marked by a second wave of COVID, but as the months went by, the outlook for the economy’s performance improved. In June, the title of our Bulletin was “Activity improves in short term, but rise in inflation accelerates end of monetary stimulus.” At that time, we revised our growth forecast for 2021 from 4.2% to 4.8% and the following month, we revised it again, this time to 5.2%. However, these expectations already contemplated low growth in the second and third quarters and a faster pickup in GDP in the last quarter of the year.

Enjoy the reading of the full report!