IBC-Br indicates tumble of almost 11% in the 2nd quarter and beginning of recession

The Brazilian economy recorded a drop of 10.94% in the second quarter of 2020, according to the Economic Activity Index (IBC-Br) released by the Central Bank (BC) on Friday (14).
The indicator is considered a "preview" of the performance of gross domestic product (GDP), which is the sum of all goods and services produced in the country and serves to measure the evolution of the economy. The official gdp result for the second quarter will be released by the Brazilian Institute of Geography and Statistics (IBGE) on September 1.
If the GDP decline is confirmed in the second quarter of this year, Brazil will have officially entered a "technical recession", that is, a decline in the level of activity for two consecutive quarters.
In the first three months of this year, the economy had already declined by 1.5%.
The decline between April and June of this year was verified by the Central Bank compared to the first quarter of 2020. The value was calculated after seasonal adjustment, a "compensation" to compare different periods of one year.
The drop in economic activity comes amid the pandemic of the new coronavirus, which has brought down the world economy and put the world on the path to recession.
In recent months, however, indicators have shown the beginning of a resumption in Brazil, in sectors such as industry and commerce.
- Forecasts for the economy
The financial market last week estimated a 5.62% downturn for the Brazilian economy this year.
Last month, the Brazilian government maintained its expectation of a 4.7% drop to 2020 GDP.
The World Bank forecasts an 8% drop in Brazilian GDP and the International Monetary Fund (IMF) estimates a drop of 9.1% in 2020.
In 2019, according to data from the Brazilian Institute of Geography and Statistics (IBGE), GDP grew by 1.1%. It was the weakest performance in three years.
Only in June of this year, according to IBC-Br data released by the Central Bank, however, the Brazilian economy showed growth of 4.89% - compared to the previous month. The number was calculated after seasonal adjustment.
This was the second month in a row of indicator growth, after recording strong declines in March and April of this year
However, compared to June last year, the Central Bank said, the institution's economic activity index fell by 7.05%. In this case, the index was calculated without seasonal adjustment, as it considers equal periods.
In the first six months of this year, according to the institution, the economic activity index recorded a reduction of 6.28%. In the 12 months to June 2020, BC figures indicate a 2.55% drop in previous GDP – without seasonal adjustment.
- GDP x IBC-Br
The results of the IBC-Br are considered a "preview of GDP". However, they did not always show proximity to the official gross domestic product data.
The calculation of the two is slightly different – the BC indicator incorporates estimates for agriculture, industry and the service sector, in addition to taxes.
The IBC-Br is one of the tools used by bc to define the country's basic interest rate. With the lower growth of the economy, for example, theoretically there would be less inflationary pressure.
Currently, the Selic rate is at 2% per year, at the historical low, and the BC indicated, in the statement of the last meeting of the Monetary Policy Committee (Copom), caution about the possibility of further cuts because Brazil would already be close to the level from which additional reductions in the interest rate could generate instability in asset prices (high dollar , for example).