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CORPORATE | 07.22.2020

MAPFRE Economics predicts fall in GDP of between 8.9 percent and 9.8 percent

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Analysis also points to major fallout in the insurance industry, but historical data indicates that the industry’s premiums tend to grow faster than Gross Domestic Product during economic recovery, especially in emerging markets.

São Paulo, July 15, 2020 — Brazil’s GDP should fall between 8.9 percent and 9.8 percent in 2020, according to the “Economic and Industry Outlook” study drawn up by MAPFRE Economics. The analysis indicates that in Brazil, the COVID-19 pandemic accelerated a process that was already ongoing at the beginning of the year, with the Brazilian economy entering into recession due to the prevailing economic management.

The main indicators, especially the Purchasing Index for May, reached extremely low levels, and continue to reveal deteriorating outlooks. Moreover, inflation stood at 1.9 percent in May, and expectations indicate that it will remain low in the coming quarters.

In light of the economic emergency, the Central Bank of Brazil slashed the SELIC interest rate by 75 basis points to 2.25 percent on June 17, with the COVID-19 crisis yet to be brought under control. With inflation clearly slowing down and the reversal of global flows, pressure on the Real has somewhat eased and it’s expected that the Bank may even implement additional cuts.


Impact on the insurance industry

The study also highlights that the pandemic, still in an upward curve, is detrimental to the development of the insurance industry, particularly for Non-Life businesses, due to the effect that the situation is having on the Brazilian economy.

Nevertheless, the Central Bank of Brazil continues to stimulate the economy with its accommodative monetary policy, taking advantage of low inflation expectations. The data gathered by MAPFRE in partnership with the European Insurance and Occupational Pensions Authority (EIOPA) shows the drop in risk-free interest rates over the previous quarter, with a curve exhibiting a positive incline. This could mitigate the negative effect of the GDP contraction and the fall in short-term rates on life insurance, savings and annuities businesses by offering guaranteed medium- and long-term rates that are higher than the short-term rates. Expectations of further declines may provide an additional incentive for the marketing of new products in the insurance segment.

In analyzing the economic crises that Brazil has experienced since 1995, the situation that may be most comparable to the current period was that experienced in 2015 and 2016, when GDP fell -6.8 percent overall. During that period, the insurance industry endured a considerable slowdown. (from 8 percent growth in 2014 to 2 percent in 2015 and 2016, in real terms).

When considering the disaggregated impact on Life and Non-Life lines during that period, we can see that the increase in interest rates adopted on that occasion by the Central Bank of Brazil to control inflation favored Life insurance, which experienced growth. However, Non-Life insurance suffered sharp falls, in line with the deterioration of the economy.


Global economic scenario

The MAPFRE Economics study foresees a more challenging scenario for the world economy than was expected three months ago. According to the analysis, although there are signs of revitalization in the world’s major economies, especially in China, the national accounts data for the first quarter and the industrial production, retail sales and global trade data for April and May indicate a higher than expected downturn in world GDP.

In order to prepare its forecasts, and given the scenario of uncertainty caused by the new coronavirus pandemic, a baseline scenario was envisaged, as in the previous quarter, in which a global recession is expected with a 4.9 percent drop in GDP in 2020, followed by a relatively quick 5.4 percent recovery next year, enabling us to make up the lost GDP by the end of 2022. Should the scenario worsen due to the recovery being interrupted by a new wave of the pandemic breaking out and the exhaustion of monetary and fiscal measures, the recession would worsen with a contraction in GDP of up to 5.7 percent, and would continue next year (-2.2 percent). It is necessary to analyze whether the global economy has in fact reached its worst indicator in the second quarter and whether the implementation of monetary and fiscal policy measures will allow us to enter a gradual phase of normalization, leading to positive indicators.


Global insurance market

The forecast indicates an abrupt fall in global GDP in 2020, with estimates ranging from -4.9 percent to -5.7 percent compared to 2.9 percent growth in 2019, meaning that a sharp drop is expected in the insurance business, in line with economic performance.

The analysis confirms that, in general, sharp declines in insurance premiums can be expected. In Life insurance, for example, the influence of the restrictive monetary policy measures levels out the declines in that line of business. This time, however, accommodative monetary policies are being favored, which will have a negative effect on this market segment. Finally, the analysis confirms that, historically, when it comes to economic recovery, insurance premiums tend to grow faster than GDP, especially in emerging markets.

The full study is available in Spanish at:

About MAPFRE — Present in Brazil since 1992, MAPFRE is a multinational group that is one of the largest companies providing services in the insurance and financial markets. Reliable and innovative, it is active on five continents and has more than 35,000 employees. In 2019, its revenues reached around 27 billion euros. A specialist in its fields of operation, it is active in Brazil in the areas of insurance, investments, consortia, capitalization, social security and home and auto protection. The company assumes international commitments such as the Principles for Sustainable Insurance (PSI) and is part of the UN Global Compact. It also maintains Fundación MAPFRE, a non-profit organization that promotes and invests in research, studies and activities of general interest to the population. More information at

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