The Economic Uncertainty Indicator for Brazil (IIE-Br), calculated by FGV’s Brazilian Institute of Economics (FGV IBRE), reached an all-time high in April of this year, surpassing 200 points. The indicator combines the Media Indicator (IIE-Br Media), which has an 80% weighting, with the Expectations Indicator (IIE-Br Expectations), which has a 20% weighting. The Media component, which has the larger weighting, soared to 195.3 points in April, affected by the COVID-19 pandemic.

In May’s first results, IIE-Br Media fell slightly, to 179.4. Similar moves occurred in the other 20 countries tracked by the Economic Policy Uncertainty Project, which calculates uncertainty indexes for these nations, using a methodology similar to the one used for FGV’s IIE-Br Media index. Most of the countries analyzed experienced their peak COVID-19 numbers in March, when there was an abrupt increase in uncertainty, followed by a slight decline. Despite having fallen back in many countries, this indicator remains unusually high in most of them.

This comparison was made by Anna Carolina Gouveia, an economist and researcher at FGV IBRE, in order to get a better understanding of the behavior of uncertainty in Brazil. In March, this indicator went up more than 15 points in 16 of the 21 surveyed countries. In April, China (189.2), Russia (178.4) and Singapore (163.4) were the closest to Brazil in terms of media uncertainty.

“In addition to the uncertainty associated with the COVID-19 pandemic, present in almost all these countries, Brazil has some factors that have further boosted the indicator. First, the country had grown slowly for more than three years after a major recession and it was pursuing macroeconomic adjustment. The health crisis has caused a lot of uncertainty about the next steps on the economic agenda. Second, in many countries the pandemic has encouraged national unity movements, but here political uncertainty reached a record level in April. Finally, the numbers of infections and deaths in Brazil have continued to grow in recent days,” Gouveia said.

Regarding the percentage increase in the last 12 months, Brazil also appears at the top of the list, with 72.4% growth, followed by the United States (63.7%), Mexico (60.2%), Russia (59.7%) and South Korea (43.4%).

One curious point among the surveyed countries is that in some cases the recent peak of uncertainty did not occur during the pandemic. China, the first country to record COVID-19 cases, has been in an environment of heightened uncertainty since last year, mainly due to its trade war with the United States. The Economic Policy Uncertainty Index (EPUI) score for China reached its high point in December 2019. The United Kingdom experienced an even higher degree of uncertainty than now in 2019, during the tensest period of Brexit negotiations. Chile experienced levels of uncertainty close to the current one in November and December of last year, because of its wave of social unrest.

Here in Brazil, Aloisio Campelo Jr., a researcher, economist and public statistics manager at FGV IBRE, identified a high level of uncertainty beginning in 2015. The average result for IIE-Br (including both Media and Expectations components) from mid-2015 until before the pandemic was 115.0 points, well above the previous average rate of 98.5.

“Between 2015 and the end of 2019, internal instability factors were preponderant. In addition to economic events like the 2014-2016 recession, Brazil has been bombarded with a succession of problems of a political nature such as impeachment, the crises of the Temer administration, the turbulent election of 2018 and the unstable relationship between the current government and Congress. High uncertainty is one factor that has prevented productive investment from gaining traction since 2016,” Campelo Jr. said.