Opinion – Samuel Pessôa: The scenario for activity worsens in 2022

Until three weeks ago my scenario was that the economy would grow 2% in 2022. I was more optimistic than the average of analysts. However, the tumultuous processing of the budget and the approval in the first round in the Chamber, to meet smaller political interests, of the draft amendment to the Constitution (PEC) of the precatoria ended up discouraging fiscal policy.

Unanchoring fiscal policy means that people’s perception of the way the National Congress, under the leadership of the Presidency of the Republic, deals with distributive conflict is that it is dysfunctional. There is a feeling that the public debt will only be sustainable with the use of the inflation tax.

This worsening of fiscal expectations devalues ​​the exchange rate, reduces companies’ quotations on the Stock Exchange and raises the market interest rate. These three effects reduce economic growth and put pressure on inflation. The stagflation scenario is reinforced.

The 2% growth had four components: 1% loading; residual gain with the reopening of the economy around 0.5 percentage point; fiscal boost of one percentage point of GDP, due to the increase in state investments (ICMS revenue grows 14% in real terms compared to 2019); and the monetary contraction (Selic on the rise) would remove 0.5 percentage point. Adding it all up, you reach the scenario I had of 2% growth in 2022.

Carrying is the growth that will occur in 2022, even if the expansion over the four quarters of next year is nil. Projections suggest that the position of the economy in the fourth quarter of 2021 will be higher than the average for the four quarters of this year.

If growth is zero in 2022, the economy will run at the same level as in the 4th quarter of 2021, which is approximately 1% higher than the 2021 average. This is the legacy of the growth from 2021 to 2022, known as loading.

After the deterioration of the fiscal scenario, almost all items that supported the 2% growth scenario in 2022 worsened. Only the expectation of an increase in investment by the states remained.

As the growth in the 4th quarter of 2021 will be less than expected, the load will fall. The gains from the reopening of the economy were compromised and will occur more slowly, mainly due to the need for a greater increase in the interest rate to fight the more pressured inflation.

We are in the midst of turmoil with the processing of the PEC of precatório. I covered the details of the PEC in the October 23 column. It is not yet clear how the end of this game will be. Too much fog to know what 2022 will be like.

In the columns of September 12 and 19, I discussed the costs to society of the construction of the Abreu e Lima plant. The numbers I presented in the column were contested by the post of Professor Eduardo Costa Pinto from the Institute of Economics at the Federal University of Rio de Janeiro. In particular, the information I used from a 2016 TCU report that the refinery caused Petrobras losses of US$19 billion was contested. According to the professor, there is a gain for Petrobras of R$7.2 billion.

Regardless of ideological differences —the professor accuses me of having made mistakes and inconsistencies in defending a liberal thesis—, it should not be possible for the TCU and the professor, using the same methodology, to find such different results. It would be important for the teacher to make available the memory of his calculations so that we can understand the source of the divergence.