The president of the Central Bank, Roberto Campos Neto, stated that a scenario of high basic interest rate (Selic) and low economic growth “clearly generates an explosive trajectory” in public accounts.
During the Meeting News event, held by Grupo Parlatório this Friday (19), Campos Neto explained why better fiscal numbers did not translate into better expectations coming from the market.
According to him, the country had a relevant fiscal improvement in terms of expectations for the public debt and for the primary result, but he emphasized that economic agents are looking ahead, which explains the worsening in the projections.
“There is concern about the fiscal trajectory, if we have interest rates of 12% or 13% with 1% growth, we clearly have a trajectory [fiscal] explosive,” he said.
The scenario mentioned by the BC president is what is being designed for next year. In recent weeks, analysts and financial institutions have revised downward expectations for GDP (Gross Domestic Product) growth in 2022. This week’s Focus bulletin, in which the Central Bank releases market forecasts, came for the first time with a forecast below 1%.
Economists consulted by BC expect growth of 0.93%. A week ago, the projection was 1%, and four weeks ago, 1.50%. Some analysis houses are already working with negative GDP for 2022.
Economists expect the Selic to end 2022 at 11% per year.
He reiterated that the country needs to insist on structural economic reforms and transparency regarding the fiscal framework so that growth is sustainable.
On the market’s reaction, he said that “a very high price was paid for a diversion [fiscal] that wasn’t that big.”
Campos Neto also added that the BC should also revise its projection for the 2022 GDP downwards, currently at 2.1%. The new estimate is expected to be published in the next quarterly inflation report on December 16th.
In addition, he stated that the foreign exchange bill (Bill), which promotes important changes in the exchange market, should be voted on in November, according to conversations he had with lawmakers.
The BC president highlighted that for the first time Brazil is going through a sharp rise in prices “importing” global inflation. That is, with effects also on prices in other countries.
He also assessed that, internally, inflationary surprises came in two waves, the first in food and the second in energy and fuel.
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