Guedes accuses banks of error or political activism in forecasts for 2022

Economy Minister Paulo Guedes criticized in an interview to the Financial Times the forecasts made by banks of stagnation or even shrinkage of the economy in 2022.

“Of course [os bancos] They’re wrong. Either they are wrong or they are politically militant. They are trying to affect the election… They still have not accepted Bolsonaro’s election,” the minister said.

At the end of October, Itaú Unibanco revised its projection for the performance of GDP (Gross Domestic Product) for the coming year, from a 0.5% increase to a drop of 0.5%.

“News of the increase in fiscal spending has raised doubts about the future of Brazil’s fiscal framework, which since 2016 has been based on an adjustable spending ceiling,” the bank wrote in its analysis, shortly after the announcement that the government would circumvent the ceiling with the PEC (proposed amendment to the Constitution) of the Precatório to increase spending in an election year.

In addition to Itaú, Asa Investments and MB Associados also revised their estimates for 2022 for the worse. Asa projects a technical recession in the first half of 2022, while MB sees a stagflation scenario (rising prices and weakened economic activity) in the next year.

Economists consulted by the Central Bank have also worsened their GDP estimates. In the most recent Focus survey, released on Monday (22), the expansion of the economy next year was reduced from 0.93% to 0.70%.

The government itself has been revising its estimates for the economy downwards, although it still projects expansion.

In its most recent analysis, the Ministry of Economy reduced its GDP growth forecast for 2022 from 2.5% to 2.1%.

According to the ministry, the main domestic factor for the cut is the deterioration of financial conditions in the country, with an increase in interest rates. The rates have been stimulated by the advance of inflation and by the market’s distrust in relation to public accounts, mainly driven by the discussion of the PEC dos Precatório.

In an interview with the Financial Times, however, Guedes repeated that Brazil would once again “surprise the world”.

The minister took the opportunity to defend the progress of liberal reforms, and said he believes there is still a chance of approval of changes in the Income Tax this year — a project whose rapporteur in the Senate said he doubted the approval.

Guedes also said he will “fight until the end” for the privatization of Eletrobrás and administrative reform and criticized investors for not recognizing the structural changes that the current government would be making in the Brazilian economy.