With the growth in the number of coronavirus cases in the world, including a recently discovered case in Brazil, concern has grown about the effects of the epidemic on the economy.
Understand how the spread of the coronavirus could affect the Brazilian economy. To do this, it is important to understand that there will be a reduction in growth worldwide, even though the extent of this reduction is not yet known. In Italy, for example, with the recent 11 deaths caused by the virus, a drop of 0.5% to 1% in GDP is expected this year.
It is believed that it is unlikely that any country will come through the crisis unscathed. Brazil, which has China as its largest export customer, is likely to be directly affected by the impacts of the disease.
China, the country where the virus was first discovered and the epidemic began, is Brazil's largest export customer. Last year alone, 30% of everything the country sold abroad went to the Chinese, who are our largest buyers of soybeans, oil and iron ore.
The problem for the Brazilian economy is the paralysis of the Chinese economy, which, due to the growth of the disease throughout the country, had to close its many factories.
The extent of the damage this will cause to the Chinese economy is not yet known. However, some are already indicating a negative GDP growth in the first quarter of 2020 and a drop of more than one percentage point in expected growth, which was around 6%.
Less exports to Brazil
With the Chinese economy in decline, the number of purchases of Brazilian products will decrease and this will impact large export companies such as Petrobras, Vale and several companies in the food industry. Since the disease began to affect global financial markets in January, the prices of oil, soybeans and iron ore have fallen significantly. All of these corresponded to 78% of Brazil's foreign sales in 2019.
Brazil, which also imports various raw materials and inputs from China, will soon feel the impact of the closure of factories in the Asian country. Manufacturers of electronics, automobile manufacturers, and pharmaceuticals are some of the sectors that are affected by the lack of products due to the factory closures.
Technology sector will feel it more
According to the expert, the greatest loss and risk is for manufacturers of cell phones and computer items, since they are the ones that have the smallest stock of these components. But it also poses a threat to the automobile industry, which uses a lot of on-board electronics.
A scenario of fewer external sales and production in factories due to the lack of inputs will, consequently, have an impact on the country's economic growth.
Brazil began 2020 with optimistic projections that pointed to economic growth of around 2.5%. A big jump compared to the highs of around 1% in the last three years. However, poor performance of the indicators at the end of 2019 has already caused these forecasts to fall back to around 1.5% according to the bank BNP Paribas. If the coronavirus continues to bring down economies around the world, it is likely that estimates for Brazil's GDP will fall even further.