Below-average rain removes 1.5 pp from Brazilian GDP and impacts inflation, says BC director

Below-average rain removes 1.5 pp from Brazilian GDP and impacts inflation, says BC director

Fernanda Guardado says that the municipality will assess climate risk for the national financial system

The record of below-average rainfall in recent years negatively impacts Brazilian economic activity and generates pressure on inflation, said this Tuesday (31) the director of International Affairs and Corporate Risk Management at the Central Bank, Fernanda Guardado.

In a Bank for International Settlements (BIS) panel on monetary policy in a context of climate change, Guardado said that the impact of low rainfall subtracts about 1.5 percentage points from GDP (Brazilian Domestic Product) per year.

The director said that in 2021 alone the rainfall index was 25% below the average of previous years, which created a stressful situation mainly in energy and food prices. According to her, the tariff flag of water scarcity that prevailed in the country had a relevant influence on the deviation of inflation.

In the presentation, Guardado said that the Central Bank is working to publish a document that will bring climate risk assessment to the national financial system.

The analysis, she said, will focus on impacts on credit and fiscal risks related to extreme droughts. In a second moment, the BC will assess risks related to other climatic factors, such as floods.

Source: Leaf

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