In the wake of the Russia-Ukraine war and the economic slowdown at the end of last year, the Bolsonaro administration has cut its estimate for GDP growth in 2022 to 1.5%, from the 2.1% previously projected. Despite the cut, the government’s expectation remains well above the 0.49% expected by the market, according to the latest Focus survey with analysts.
At the same time, expectations for inflation in 2022 have risen. In the projections of the Ministry of Economy, Brazil’s benchmark inflation index IPCA stood at 6.55%, compared to 4.7% expected in November. The National Consumer Price Index (INPC) reached 6.70%, against a projection of 4.25% in November, and the General Price Index – Internal Availability (IGP-DI) is expected to close the year at 10.01%, against 5.42% estimated previously.
Valor had previously reported that the government admitted a reduction of 0.5 percentage points in the growth this year, because of the war in Ukraine.
The conflict has already impacted the economy and will continue as a risk factor, said Pedro Calhmann, the secretary of Economic Policy. Besides driving inflation around the world because of the rise in commodity prices and bringing volatility to the fuel market, there are other risks: disruption of global value chains, deterioration of financial conditions and impacts on international trade and the balance of payments in Brazil.
The pandemic also continues as a risk factor to be followed, he said. It could impact growth and inflation.
Besides the effects of the war, the revision of the GDP is explained by the revision of the national accounts data by the Brazilian Institute of Geography and Statistics (IBGE) and also by the weaker activity seen at the end of 2021.
Fausto Vieira, the undersecretary of Macroeconomic Policy of the Ministry of Economy, said the government projects growth of 0.5% in the first quarter of 2022. This scenario includes growth of agribusiness (2%) and services (0.4%) and contraction of the industry (-0.8%). Economic growth in 2022 will be led by the recovery of the labor market and private-sector investments, the Ministry of Economy said.
Investments are growing because of the concessions program, said Mr. Calhmann. The contracts already signed contain commitments for expansion, and improvement of the structures granted that. In 2022 alone, those commitments reach R$78 billion. This is equivalent to a 2.3% growth in investment, with an impact of 0.45% in the GDP, he highlighted.
It is important that the government continues on the path of fiscal sustainability in order to have a medium and long-term scenario that is friendlier to investment, the special secretary of the Treasury and Budget, Esteves Colnago, says. “In January 2022 we are almost at zero deficit and heading towards surplus,” he said. But, he added, the scenario is challenging and “we need to see how it will progress.”
Since August 2020, 11 million jobs have been created, Mr. Vieira pointed out. “The participation rate is close to the historical average, but we believe it will continue to grow reaching similar levels to 2018 and 2019.” The country, however, still has a high unemployment rate. In 2021, the average annual rate was 13.2%, compared with 13.8% in 2020 and 12% in 2019.