Economy Minister Paulo Guedes said on Tuesday (14) that he predicts a recession in the major global economies of the United States and Europe in the coming months, given the combination of persistent inflationary pressure with the cycle of high interest rates, which should have a negative impact on the pace of economic activity in developed markets.
The supply shocks in global production chains caused in recent years by the pandemic, and more recently exacerbated by the Ukrainian War, were cited by the minister among the main reasons that explain the stagflation scenario projected ahead.
“I don’t think it will improve anytime soon. It will greatly worsen the situation of the world economy,” said Guedes during his participation in the Brasil Investment Forum event, in São Paulo. “I have no doubt that recession is coming in Europe, in the United States.”
In this scenario, he said that Brazil can benefit from the growing search of countries in general for trading partners with greater geographical proximity, and that do not pose a risk to neighbors, such as Russia.
“Who is close and friends with Europe, America, China, Russia? Brazil dances with everyone,” said the minister, adding that improvements in the country’s fiscal and tax framework are necessary before an opening aggressively to foreign trading partners, in order to make the local industry more competitive to face the increase in competition.
“We are liberals, but we are not muggles,” said the minister.
Tribute cut gives scope for businessman not to readjust prices and is not pricing, defends minister
Guedes also stated that tax reductions by the government give scope for prices not to be readjusted at all times, even if costs rise. He also said that there is no idea of ​​price fixing in the government.
Last week, the Minister of Economy and President Jair Bolsonaro appealed to businessmen to squeeze profit margins this year with the aim of holding back inflation.
“Yesterday we approved the reduction of ICMS in the Senate, we had already reduced the IPI. When you reduce the IPI and ICMS, you are giving a margin of slack, even if costs go up, so you don’t keep readjusting the price all the time, That’s what I said, it has nothing to do with pricing”, he said. “Whoever froze prices in the past has this ghost in their heads for the disaster they caused in the economy.”
with Reuters
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