Opinion – Samuel Pessôa: For 2022, I estimate that the growth will be around 1% to 1.5%

Last column of the year. Moment in which I take stock of the scenario I drew at the end of the previous year (2020) for the one that ends, 2021. And in which I design the scenario for the year to come. I thought the growth would be 3.6%. It should be 4.6%. The ‘V’ turn of the economy after the sudden stop in the second quarter of 2020 continued until the first quarter of 2021. Then the economy took a step sideways.

But first-quarter growth was enough to sustain a strong economic recovery, fully reversing pandemic losses; in the fourth quarter of 2020 the economy was probably 0.6% above the position in the same period of 2019, the last quarter before the epidemic.

The worst performing variable was inflation. He estimated that the IPCA would close the year at 3.5%, and will hit 10%. Projection error of 6.5 percentage points. Around 2.5 pp of the error were due to the energy shock, as a result of the lack of rain. Another 2.5 pp was due to the shock of industrial goods, caused by all the problems with global production chains. Theme that I have dealt with countless times in this space. The 1.5 pp that remains is due to a much slower reversal of the 2020 food shock than I expected, also caused by the shortfall in the Brazilian crop due to the very dry weather.

For 2022, I estimate growth to be around 1-1.5%. Our scenario contemplates growth of 0.6% in the fourth quarter of 2021 compared to the third. This growth will generate a statistical load, from 2021 to 2022, of 0.7%. That is, if growth in the four quarters of 2022 is zero, the economy will operate at the same level as the fourth quarter and this will be 0.7% above the 2021 average.

The Selic cycle will go up to 11.5-12%, which will produce real interest in the range of 6-6.5%, depending on our scenario of 5.5% inflation in 2022. How do I consider the real interest to be neutral , that which neither contracts nor expands demand, is around 3%, the real interest charged in excess of the neutral interest in 2022 will be approximately 3 percentage points. Monetary contraction of 3 pp removes about 0.7 pp of growth.

Thus, the load from 2021 to 2022 will be 0.7%, and the monetary contraction will remove 0.7 percentage point of the activity. Growth, considering these two factors, would range from zero to zero.

But then, we have to remember the extratetal budget approved by Congress, of approximately R$ 100 billion, will generate fiscal expansion. Added to this is the increase in investment by the states, which have cash on hand —ICMS revenue rose in 2021, in real terms, by 16% compared to 2019—, and it is difficult for growth in 2022 to be less than 1%.

In 2022, we will have monetary policy on the brakes and fiscal policy on the accelerator again. It won’t be the first time.

For the exchange rate, there should be some decompression in the next two months, due to the approval of the PEC dos Precatórios and the closing of the 2022 Budget. Knowing the size of the account removes a portion of the risk.

The appreciation that may occur at the beginning of the year is not expected to be very strong, as a significant portion of the devaluation since last June was due to the strengthening of the dollar against other currencies, following the anticipation of the US interest rate hike schedule in a function of the huge US inflationary surprise.

Throughout the year, with the electoral race, the risk should increase. My hypothesis is that at the end of the year, regardless of who wins the election, we should start a new period of exchange rate decompression, due to the resumption of the fiscal adjustment agenda with the new government.