Opinion – Vinicius Torres Freire: Lula, Bolsonaro and the ugly twists of the economy until the election

How will the campaigns of Lula da Silva (PT) and Jair Bolsonaro (PL) react to the turmoil of the economy until the election?

In addition to the risk of new global shocks, a bad turnaround is expected from June onwards. Changes here and in the world economy will further limit the possibilities and margin of error of the government that takes over in 2023. The weight of what the favorite candidates say in the campaign will therefore be greater, perhaps with immediate effects on the life of the country.

GDP performance in the first quarter must have been good. For economists at Itaú, the growth was 1% compared to the final quarter of 2021. In the second quarter, it would be 0.6%. For those from XP, 0.8% and 0.4% respectively. Starting in July, GDP would sink by around 1% per quarter.

If the GDP performance in the first quarter was good, perhaps the best of the year, and the toughness is so great, what will life be like if it gets worse again?

The first half of the year, apart from new acute shocks, will see an increase in the number of employed people, albeit with the lowest wages of the decade. In one year, more than 8 million people found work.

More employment, government measures (FGTS, anticipation of the 13th of the INSS, tax discounts, etc.), reopening of services and commodity prices helped to weaken economic confidence and offset, at least in political opinion, the effect of inflation.

The candidates will be officially launched between July and August, when the economy is already soaking in vinegar, if the forecasts are confirmed. The TV and radio campaign only starts on August 26, 37 days before the first round.

Inflation will continue at 10% per year until September; the food shortage will be even greater. Interest rate hikes, credit crunch, end of electoral measures, political uncertainty and global malaise tend to do the rest of the damage. Perhaps by then the bomb Congress, crazy and/or bolsonarista, may have worsened the prospects even more.

Bolsonaro would then have even less to say about the economy. In addition to the history of mismanagement, the news would be bad. A campaign of culture war, garbage in the networks, shredding Lula (“corrupt, communist, against the family” etc.) and threat of a coup are expected.

It would, even so, be a favorable situation for the opposition – if the economic forecasts are confirmed, it should be noted. But the situation will not be simple for other reasons as well.

The outlook for 2023 is for even lower GDP growth, government revenue increasing less and public debt on the rise, all followed by higher interest rates. Even if the world economy does not go into recession, it will cool off. The propensity to invest in risk zones, low GDP and political uncertainty (Brazil) will decrease. The pressures on the 2023 government will be great and with the potential for turmoil (social aid, readjustment of servers, illusion of immediate solutions, etc.).

A favorite candidate who proposes magic to deal with this situation and, for the rest, does not have a credible reform plan (“liberal” or otherwise) can create turmoil as early as 2022, detonate the prospects of his possible government or attract retaliation for himself yet. during the electoral contest.

There could be a positive surprise and a third quarter still without vinegar – if the financial strain in the US eases, with peace in Ukraine, Chinese recovery, well-off families in Brazil squandering a little more of their savings. But accidents can happen, like a severe American financial crisis.

A good candidate will have to know how to navigate this streak of bad luck if he wants to avoid sinking at the polls or, later, the country.