IPEA predicts a 10-20% drop in Brazilian exports in 2020

The Applied Economics Research Institute (Ipea) released a study this Tuesday (April 28) about the possible impacts of the Covid-19 pandemic on the Brazilian trade balance between 2020 and 2021. The projections point to a retraction in foreign trade this year, in response to the worsening global financial crisis.

On the export side, the forecast is for a fall of between 10% and 20% in 2020, to US$180 billion. The study also predicts a 20% slash in imports, reaching U$140 billion. According to the survey, the sharp drop in the commodities market – especially in the oil sector – is seen as one of the drivers this drop, with impacts on the country’s trade balance and a significant drop in Brazilian exports.

The work presents three possible scenarios derived from data provided by the International Monetary Fund (IMF) and the World Trade Organization (WTO). The WTO predicts two scenarios: a pessimistic one with a reduction of around 30% in world exports and imports for the period analyzed, and another moderately optimistic one with a reduction of 19%. The IMF, on the other hand, points to a 20% drop in trade flows globally until 2021.

The data corroborates the forecast of a significant drop in Brazilian exports and negotiations with commercial partners such as the European Union, which is expected to reduce by 20% in the next two years due to the Covid-19 crisis. The survey also indicates a strong impact of the crisis on Latin American countries, since many of them are highly dependent on the production and export of energy and mineral commodities. “This could have very negative effects on Brazilian exports of manufactured goods and, in turn, on the country’s own industry’s recovery capacity,” evaluates the coordinator of International Economic Studies at Ipea, Fernando Ribeiro, one of the authors of the study.

The study points out that even after the peak of the pandemic and a return to normal life, there will be a fall in income and an expected increase in the level of household indebtedness, putting downward pressure on the demand for durable and semi-durable consumer goods. “The trend may continue to cause impacts on foreign trade activity, possibly suppressing resumption of growth in commercial activity in the global context,” says Ribeiro. Even with these negative trends predicted, foreign trade activity is not expected to remain totally stagnant over the two year period being contemplated. “Despite the difficulties, the country should preserve a surplus in 2020. But eventual recovery will have to wait until 2021,” he pondered.

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