The economic impacts of COVID‐19 in Brazil based on an interregional CGE approach

Porsse, Alexandre A.; de Souza, Kênia B.; Carvalho, Terciane S.; Vale, Vinícius A.

This study projects the economic impacts of COVID‐19 outbreak on the Brazilian economy using a dynamic interregional computable general equilibrium model. We considered two scenarios. The first scenario has two channels of transmission over the economic system: a negative shock of labor supply due to the rates of morbidity and mortality caused by the pandemic, and a temporary shutdown of nonessential economic activities. The second scenario adds to the first the effects of the government fiscal package adopted to counteract the effects of COVID‐19 on the economy. Furthermore, in both scenarios, a sensitive analysis related to the temporality of the shutdown is considered by assuming 3 and 6 months of shutdown. The results indicate a reduction of 3.78% in the national GDP growth rate in Scenario 1 and a reduction of 0.48% in Scenario 2, in 2020, with 3 months of shutdown. With 6 months, the reduction would be greater, 10.90% and 7.64% in Scenarios 1 and 2, respectively. Thus, the government fiscal stimulus considered in this study partially mitigates the reduction in GDP projected under the COVID‐19 outbreak. The study also presents sectoral projections at the national and state levels. The estimates indicate reductions in the GDP of most of Brazilian states in both scenarios.