After boosting federal revenues throughout 2021, the behavior of inflation should have an opposite effect in 2022 and help to deepen the government deficit. The vision is of the IFI (Independent Fiscal Institution), a body of the Senate that monitors public accounts.
According to the institution’s Fiscal Monitoring Report, revenue will grow in line with decelerating inflation in 2022. Expenses will rise largely linked to the double-digit advance in prices last year – when the IPCA was 10, 06%.
Economists expect (so far) that inflation will fall by almost half, which leads to less expansion in revenues. The Focus bulletin, which brings market projections compiled by the Central Bank, pointed out this week that the expectation for the IPCA rise this year is at 5.5% (although forecasts are increasing).
“Tax collection in 2022 is unlikely to repeat the strong growth of last year […]. Economic growth is expected to slow down […]inflation will be lower this year and no strong exchange rate depreciation is expected,” says the IFI.
In 2021, federal revenue recorded a record R$ 1.8 trillion, helping the government to reduce the deficit by 95% in relation to the previous year’s historic hole and encouraging Minister Paulo Guedes (Economy) to make repeated statements that the accounts were under control even in the midst of the spending ceiling dribble operation.
Economists, however, emphasize the effect of inflation on revenue. Although the revenue result is corrected by the IPCA, a good part of the numbers escapes this adjustment. Inflation for 2021 was just over 10%, but gasoline prices, for example, rose 47.49%.
The IFI claims that “inflation-based fiscal adjustments” are unsustainable. For the institution, the collection scenario and other factors should lead to a deficit greater than expected by the economic team.
The IFI’s projection is that, although it should start with a surplus, the year will have a deficit of R$ 106.2 billion. In 2021, the deficit was BRL 35 billion. The IFI estimate is higher than the government’s most recent projection of R$76.2 billion in the red.
The situation could worsen if proposals with the objective of reducing taxation on fuels succeed. “In case of approval, such proposals would lead to an important waiver of revenue”, says the entity.
According to the IFI, the debt will grow in this and in the coming years pressured by fiscal data and the higher Selic. “Interest spending, for example, has already grown by 1 percentage point of GDP throughout 2021 and interest rates on new Treasury issues are advancing month by month,” he says.
This week, the market raised the outlook for the basic interest rate at the end of 2022, after the Central Bank left open the course of the Selic and amid inflationary pressure, at the same time that it increased the forecast for the rise in prices.
The Focus survey released by the BC on Monday (14) showed that economists consulted began to calculate the Selic rate now at 12.25% at the end of 2022, against a rate of 11.75% predicted the previous week. For 2023, it follows the Selic estimate at 8.0%
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
