Opinion – Vinicius Torres Freire: Food should rise less in 2022, but it will still be salty in the election

The price of food is expected to increase less in 2022. The grain harvest is expected to grow by 14%, in the official forecast, which tends to contain the scarcity of processed foods and meats. It rained just in time this year, which also helped to prevent electricity production from collapsing, by the way. So far, no climate problems have occurred, here and around the world, as in the 2020/2021 harvest.

It is a summary of a report by economists at Bradesco, which forecasts a 4.5% increase in food prices in 2022. However, food is not just soybeans and corn; rice is cheaper, but the wheat crop here and abroad was not good. Etc. The price of fertilizers has tripled this year, it could be bad next. The exchange rate parked at a high level. Prospects have improved, but country life is uncertain.

It’s a very partial refreshment. Until October this year, annual food inflation was at 13.3%. In other words, the speed of increases may be slower, but the price will remain high, even more so because wages, on average, are losing out on inflation.

From August 2019 to August 2021, the most recent data, the average income from work increased by 7.1% (in nominal terms: without discounting inflation, as calculated in the IBGE Pnad for the quarter ended in these Augusts). General inflation (IPCA) accumulated in these two years was 12.4%. Food inflation of 24%.

That is, the average real income (discounted for inflation) fell. It was even smaller for those who spend more on food (the poorest, when they have to spend). Based on IBGE data, the average real wage dropped 3.4% in this period.

The outlook for income from work, “wages”, next year is bad. In the years between the 2015-2016 recession and the epidemic (2020), the average wage increased by 1.5% per year in real terms (in addition to inflation). The year 2022 is far away, it’s an uncertainty, but uncertainty with its foot stuck in the mud. If the real income from work grows by 2%, it will be a miraculous success. But it will not be enough to recover the average loss compared to 2019.

This means that inflation, even lower in 2022, will have lasting effects on purchasing power, particularly for the poorest.

There is still doubt about the size of the drop in the inflation rate in 2022. This year, the increase in the IPCA should be around 10%. For next year, forecasts are approaching 5%, with an upward trend. But these informed guesses are often wrong, if only because there are clashes, relevant unexpected events.

For a start, we don’t know how effective monetary policy will be. That is, how much higher interest rates will be able to contain inflation. The doubt is greater because the Brazilian economy has changed a lot in this almost decade of crisis and other changes.

Furthermore, we do not know what the price of electricity will be, which from now until next year depends essentially on rain. The price of energy in general depends on the winter in the Northern Hemisphere, on the supply of Russian gas to Europe, on what OPEC will do with oil prices and so on.

We don’t know if the supply of raw materials, parts and parts for the world industry will return to close to normal by the middle of next year, according to the new forecast (this year’s, it broke).

We don’t know what the exchange rate will be. Any pocket shot kicks the dollar price up. A complicated election campaign can make the situation worse.

Inflation and the line of desperate for Auxílio Brasil are or could be two major issues in the election. But we are busy with topics that yield “bullshit” from Twitter.