BRASILIA (Reuters) – Economy Minister Paulo Guedes said on Wednesday that Brazil’s problem in 2022 will not be low growth, but resilient inflation, noting that he does not believe in the most pessimistic market forecasts for activity in the next year, but forecasts that inflation could surprise upwards.
“Let’s see what will happen to these people who are predicting zero, or 1% (of GDP growth in 2002)”, said Guedes, in English, while participating in a virtual event promoted by Bradesco BBI.
“The problem will not be low growth, the problem will be resilient inflation. Inflation will probably be a little higher than you’re predicting, but growth will also be higher than you’re predicting, so let’s see. I don’t make predictions, I make fun of predictions, of wrong predictions.”
The market estimates that GDP will grow 0.9% in 2022 and that the IPCA will rise by 4.8%, according to the most recent Focus report.
According to Guedes, there will be a cyclical slowdown in the country amidst the monetary tightening cycle conducted by the Central Bank to tame inflation, but he stressed that the background is one of sustainable economic growth based on private investments.
The minister also reinforced that his scenario takes into account the approval by the Senate of the PEC of Precatório without damages to what he called the country’s fiscal architecture.
“It is true that interest rates will rise as the BC fights to control inflation … but we are really making the transition to sustainable growth in all sectors,” he said.
According to Guedes, the talks held by the government on a trip to the United Arab Emirates assured the country a commitment of investments of 10 billion dollars in 10 years and, in total, Brazil already has assured investments of 700 billion dollars for the next decades.
Guedes also criticized the proposal presented by some senators to remove the payment of court orders from the spending ceiling, noting that, in a scenario where the PEC for court orders is not approved in the Senate with the format already approved by the deputies, then he will be concerned with economy in 2022.
“Maybe this is the asymmetry (of market and government projections for GDP), because I’m still hopeful that we’ll approve the original proposals. But if they don’t approve, then I’ll be very concerned about growth.”
The minister defended the design of the PEC approved by the Chamber as an instrument that will give predictability and feasibility to the Public Budget. On the one hand, the PEC establishes a limit to the annual payment of court orders and, on the other, modifies the spending ceiling rule. With that, the proposal opens up a space of 91.6 billion reais for spending next year.
Guedes again defended the allocation of shares of Petrobras, Eletrobras and Correios to a fund aimed at eradicating poverty.
“If oil is going up or the interest rate is going up and then food is going up… the ‘first best’ is, of course, sustainable policies for the eradication of poverty,” said the minister.
(By Marcela Ayres and Victor Borges)
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