Government raises inflation forecast in 2021 and distances itself

MacroFiscal Bulletin of the Economic Policy Secretariat (SPE) of the Ministry of Economy indicates that even the government has already assumed considerable inflation rates for this year and a departure from the target established for price increases, which is 3.75%.

According to the document, released on Thursday (16), the Broad National Consumer Price Index (IPCA) may increase by 7.9%. The government’s previous expectation, published in July, was 5.9%.

Among the factors listed to justify the new estimate are “significant increases in fuel and electricity prices, given the readjustments in gas prices and changes in tariff flags”.

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When dealing with food inflation, the text emphasizes that there was an increase observed between March and July, but that now prices show “relative stability”. In August, the price of food had an accumulated increase of 16.59%, one of the most evident signs of the loss of purchasing power among Brazilian families.

Forecasts for the National Consumer Price Index (INPC) are even worse. According to the bulletin, the increase of the INPC can reach 8.4%. In August, the government had sent the Budget Bill to Congress with a less negative estimate: 6.2%.

As the INPC is used to define the adjustment of the minimum wage, pensions and pensions, the increase in the index means that the budget will be tighter. To adapt, the government needs to review the spending forecast and decide what will receive less money.

Bolsonaro’s administration had plans to increase social programs for 2022, the election year. There has even been an announcement of the creation of a new Bolsa Família. The government boasted about the inclusion of new beneficiaries and an adjustment in the amounts paid.

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During the presentation of the bulletin, the secretary of Economic Policy Adolfo Sachsida, affirmed if there is an increase in mandatory expenses, the government will make cuts in discretionary expenses.

“We will not spend more. We will spend exactly what we spent this year, corrected by the IPCA, which readjusts the spending ceiling”.

The MacroFiscal Bulletin maintained its projection for economic growth for this year. The government’s estimate for the Gross Domestic Product (GDP) remains at 5.3%. According to the text, the expectation is that there will be improvements in the services sector, which would contribute in a “robust way to the economic recovery”.

Edition: Anelize Moreira

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