Brazilian economy is in a "jobless recovery" following a spike in inflation

According to a Reuters poll, the Brazilian economy will continue to experience a so-called “jobless recovery” following this year’s inflation spike, while forecasts for recovery in Mexico appear stronger amid concerns about a possibly tougher monetary policy in the United States.

On the outside, Brazil’s macroeconomic picture appears to have improved as consumers shake off the COVID-19 epidemic, firms experience a resurgence of M&A activity, and the agriculture industry flourishes on huge international demand. Recent increases in GDP estimates, however, are at conflict with a number of issues. Rising inflation, which is presently the major topic, is expected to be followed by consistently high levels of joblessness into next year’s national elections in Brazil.

Because the economy will need some more time to reabsorb people and restore jobs, average unemployment is estimated to stay in the double digits this year, reaching around 13.6 percent. The rising unemployment rate will restrain services inflation, which accounts for nearly 40% of the headline figure.

According to the median estimate of 20 economists surveyed between July 5 and July 13, Brazil’s average jobless rate for 2021 was projected at a record 14.2 percent in the Reuters survey. This is in contrast to a large increase in GDP estimates.

According to a larger group of 40 respondents, Latin America’s No. 1 economy is expected to grow 5.1 percent in 2021, considerably above the relatively moderate 3.2 percent growth rate recorded in April’s survey. Inflation forecasts have also risen, reaching 6.5 percent from 5.1 percent in the previous quarter.

Many Brazilians have lost their livelihoods as a result of the virus. Many also point the finger to President Jair Bolsonaro’s pro-business stance. Other figures suggest robust employment creation, according to the government.

Bolsonaro and his expected opponent, former center-left President Luiz Inacio Lula da Silva, have not formally announced their candidacies yet, despite the fact that the 2022 presidential election remains just a year away.

President Andres Manuel Lopez Obrador of Mexico, however, looks to be on a more solid foundation than his Brazilian counterpart. Although both are embroiled in corruption allegations, Lopez Obrador is under far less scrutiny. Similarly, Mexico’s economy is getting better, with stronger growth and relatively low inflation than that of Brazil. Mexico’s GDP and consumer pricing are anticipated to grow 5.9 percent and 5.1 percent this year, respectfully, compared to 4.7 percent and 3.9 percent in the April survey.

Mexicans are keeping a very close eye on the Federal Reserve of the United States’ intention to gradually phase off its massive assistance. Thus far, this has been welcomed positively from across the border, instead of as a hindrance to financial movements.

In contrast to a drop in Brazil’s anticipated growth in 2022 to 2.2 percent from 2.3 percent, the study predicts Mexico’s GDP would increase 2.9 percent next year, up from 2.5 percent in April.

Analysts at BBVA Mexico said in a statement that they have raised their 2022 GDP projection to 3.0 percent from 2.8 percent due to a better investment picture. This increase will most probably encourage formal private employment to return to pre-pandemic levels in 1Q22.”

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