Brazil economy to shrink by 5.8 per cent in 2020

Brazil's economy is projected to shrink by 5.8 per cent in 2020, the International Monetary Fund said Monday, revising a more pessimistic forecast of a 9.1 per cent contraction made mid-year.

"The economy is projected to shrink by 5.8 per cent in 2020, followed by a partial recovery to 2.8 per cent in 2021," the IMF said in its annual report on Latin America's largest economy.

In the report released Monday the IMF praised the right-wing government of President Jair Bolsonaro for its response to the economic crisis prompted by the coronavirus.

"The strong policy response averted a deeper economic downturn, stabilized financial markets, and cushioned the effects of the pandemic on the poor and vulnerable."

However, given a sharp rise in primary fiscal deficit, gross public debt is projected to jump to around 100 per cent of GDP in 2020, the IMF said, remaining high over the medium term.

"Risks are exceptionally high and multifaceted," the Fund warned, "including a second wave of the pandemic, long-term scarring from a protracted recession, and vulnerability to confidence shocks given Brazil's high level of public debt."

Brazil has the world's second highest number of deaths from Covid-19 after the United States, with more than 145,000 fatalities from the disease.

Almost 12 million jobs were lost due to the crisis between February and July, of which over seven million were in the informal sector, and the unemployment rate rose to 13.8 per cent.