Brazil is on the verge of an economic crisis due to the outbreak of Covid-19 pandemic which has led the country into a debt situation, media reports said. The South American country continues to cope with the pandemic. The report has been produced by the International Monetary Fund (IMF).
IMF, told the media, “There is an unusually high degree of uncertainty over how the pandemic will evolve and the expiry of fiscal support at the end of the year will add pressure on the already-wide output gap. The government’s emergency aid program, which provided cash stipends to some 23 million Brazilians, helped avert a “deeper economic downturn, stabilized financial markets, and cushioned the effects of the pandemic on the poor.”
The IMF’s report further added that Brazil’s economy is expected to tumble 5.8 this year, however, it will expand by 2.8 percent next year. The economy remains fragile due to an increase in the use of bad loans against a growing fiscal deficit and prevention of possible economic downturn.
It is reported that these events have the potential to affect Brazil’s current Covid19 recovery on the back of a second wave of the virus and long-term economic damage from recession. An additional financial response might be needed if the problem persists.
The Brazilian government’s commitment towards constitutional spending was essential to drive the financial market and help contain the damage caused by the pandemic. This is largely due to the 100 percent rise in public debt.