The world economy is going through a moment of instability and uncertainty regarding the performance in the coming years. The emergence of the Covid-19 pandemic, associated with other factors, such as the trade dispute between the USA and China, and Brexit, are some important factors that have influenced the economic scenario.
In general, international interest rates fell again in order to encourage economic growth, even though they were already at historically low levels. The indebtedness of nations, which was already at worrying levels after the 2008 crisis, is rising even more, and its impact will occur in the coming years.
The United States, the first economy in the world, had been registering a solid evolution of its GDP and, like the other countries, must present a strong reduction of the GDP in 2020.
The graph below shows a record of monthly growth time, which started in June 2009, which is being interrupted.
The Brazilian economy, which was in a context of low growth in recent years, after a strong recession that started in the 2nd quarter of 2014, should register a significant drop of GDP in 2020.
The graph below shows the evolution of real quarterly GDP, compared to the previous year, from 2014 to the 1st quarter of this year.
In August 2020, the Central Bank of Brazil (BCB) reduced the basic interest rate of the economy, the Selic, to 2.0% per year. Real interest in Brazil was already at a negative level in the previous month, in July 2020 (-0.06%). In this way, the investment portfolios will be affected and the risks more incorporated into the strategies of managers and investors in general, including being able to result in overvalued assets in the financial and capital markets.
The graph below shows the evolution of the Selic rate, IPCA and real interest target from January 2017 to July 2020.
GDP is expected to recover in 2021, which may be slowly, depending mainly on the solution for Covid-19, via the emergence of a new vaccine. Tax reform and administrative reform are other factors that can contribute positively to the country’s economic scenario, if well structured and effectively applied.