October 2, 2020


1. Administration negotiates use of “war budget” next year

The federal government is negotiating with Congress to allow for the possibility of using the “war budget” model – which was adopted as a result of the pandemic – in 2021. The economic team say that they are not planning to exceed the spending celling, which limits public spending to the amount that was spent in the previous year. However, the economic team wants to have some contingencies in case of a second wave of the coronavirus or any other national public emergency situation.

The government’s intention is to include a clause in the federal pact planning an emergency parallel budget in case of public calamity. In exchange, President Jair Bolsonaro’s economy team will be committed to making cuts, freezing salaries of public servants and cancelling public contests to fill vacancies in the public sector. Some members of Congress believe the pandemic will continue to have effects in 2021 and have therefore not dismissed the proposal.

O Estado de S. Paulo: Governo diz que orçamento de guerra será para calamidades

2. IMF report warns of “exceptionally high” risks for Brazil

This week, an International Monetary Fund (IMF) mission published a report on the Brazilian economy and revealed that the country faces “exceptionally high and multifaceted risks”. According to the organization, a second wave of the coronavirus and high levels of public debt are two of the greatest threats facing Brazil, as they could result in long-term consequences including a “prolonged recession” and “vulnerabilities to confidence shocks.”

However, the report also makes positive assessments and improves the GDP projection for this year, going from -9.1% to -5.8%. For 2021, the IMF predicts 2.8% growth, less than the previously forecasted 3.6% figure. The reduction in emergency aid payments is mentioned as a reason for the recovery of private consumption over the next few months being lower than expected.

Valor Econômico: FMI aponta riscos altos para o país

3. Readjustment of food prices leads to a record monthly increase in inflation

A readjustment of food prices led to an increase in inflation to its highest monthly level of the past 17 years. The Extended National Consumer Price Index increased by 0.64% in September. The official inflation accumulated in the past 12 months is now 3.14%. The increase in domestic consumption – due to more people cooking at home – and the increased price of the U.S. dollar are the main causes of the increase in inflation. Among food items, the most significant price increases came from soy oil (27.54%) and rice (17.98%).

Another study, by Fundação Getúlio Vargas, shows that the effects of inflation on the low income population has also reached a record high. The price index for low income families – who earn up to 2.5 times the minimum monthly wage (R$ 2,612.50; USD $472) – increased 0.89%, more than for families that earn up to 33 times the minimum wage (R$ 34,485.00; USD $6,230), with a 0.82% increase. Assessing the accumulated inflation for the past 12 months, the poor experienced 4.54% inflation while people with higher incomes saw 3.62% inflation in the same period.

Folha de S.Paulo: Inflação oficial bate recorde e sobe 0,64%
Valor Econômico: Inflação dos mais pobres aumenta em setembro

4. Brazilians save more money during the pandemic, reaching R$ 1 trillion in savings

For the first time in history, the total balance of Brazilian savings accounts reached R$ 1 trillion (USD $180.75 billion), according to data shared this week by the Central Bank. Deposits surpassed withdrawals in September by R$ 13.2 billion (USD $2.39 billion). Government measures, such as those allowing people to withdraw from their Length of Service Guarantee Funds (FGTS) and the emergency aid, help to explain the increase in savings.

In September alone, according to the Central Bank, Brazilians deposited R$ 294 billion (USD $53.13 billion) in their savings accounts, the largest amount in a month since 1995. Withdrawals, however, have also registered a record high at R$ 280 billion (USD $50.6 billion). According to analysts, simple savings account became more attractive to small investors due to low basic interest rates in Brazil, with an increase in discounts on financial bonds from the Treasury and income tax exemptions.

6 Minutos: “Patinho feio”, poupança tem captação recorde

5. Brazil has over 5 million confirmed coronavirus cases

Brazil now has over 5 million confirmed cases of COVID-19. However, specialists say that – due to unreported cases – coronavirus has likely infected over 30 million people. With the death toll standing at over 150,000, virologists note that the descending curve of the disease is slower than what was seen in European countries. In absolute numbers, Brazil ranks third in the world for number of confirmed cases and second in number of deaths.

This week, the Ministry of Health announced that it would pay an advance of R$ 830 million (USD $150.01 million) – from a total of R$ 2.5 billion (USD $451.85 billion) – to ensure the country will receive 140 million doses of the coronavirus vaccine in 2021. The money is being paid towards the global vaccination initiative COVAX, formed by the World Health Organization. The Brazilian government is also considering buying and using other vaccines, such as the one being produced by Chinese pharmaceutical company Sinovac Biotech, which will be used in the state of São Paulo through a partnership between the manufacturer and Instituto Butantã.

O Globo: Número de pessoas contaminadas é 6 vezes maior
O Estado de S. Paulo: Governo federal fecha acordo para 140 milhões de vacinas
O Globo: Acompanhe notícias sobre a pandemia
IRRD Covid-19: Veja o mapeamento de casos no Brasil e no mundo