A man walks past presidential campaign posters depicting Brazil’s former President Luiz Inacio Lula da Silva and President Jair Bolsonaro in Brasilia, Brazil, September 23, 2022. Portal/Adriano Machado/File
Brazil face a stronger-than-expected growth, falling unemployment and apparently healthy finances, but the economy can be one Poison apple for the election winner on the Sunday when the President is measured Jair Bolsonaro and the former president Luiz Inacio Lula da Silva.
The favorable economic numbers could be just a mirage in a country still recovering from the effects of the pandemic and war in Ukraine skyrocketing inflation and skyrocketing debt.
“FISCAL BOMB”
Bolsonaro, the according to all the polls, he will lose the elections to Lulaends his first term of office with a Brazil owes more than when it took power (equivalent to 77.6% of GDP last July) and will exit what economists have called “tax bomb”.
“It seems that we are in a good situation of tax breaks, but it is only one picture, if we see the whole film, we see several Threats of concern by 2023“, the economist told the Efe news agency Juliana DamasceneAnalyst at the consulting firm Tendencias.
Various economists consulted by Efe agree with Damasceno that the costs are limited and there are social demands that will burden the budget and the budgetary situation in the country.
File photo of a woman placing her resume in a box next to a sign that reads ‘Job Opportunities’ in downtown Sao Paulo, Brazil. October 6, 2020. Portal/Amanda Perobelli/File
As an example, Damasceno cited the more than likely maintenance of social assistance 600 reais a month (about 115 dollars) to the poor or a possible Salary increase for civil servantswhose payrolls have been frozen since 2017.
Neither of the two proposals can be found in the draft budget submitted by the Bolsonaro government to Congress, but social pressure may make its approval inevitable.
“Many problems are being postponed until next year, mainly on the fiscal side,” warned Bráulio Borges, an economist at the Getulio Vargas Foundation (FGV) and LCA consultancy, Efe.
A ROBUST GDP IN 2022 AND A SLOWDOWN FOR 2023
According to Borges, the “benefits” that the Bolsonaro government has granted in fiscal terms are intended to stimulate the economy in the middle of the election year will jeopardize the economy of the country in the coming years.
Trucks stand in front of the sugar and soybean terminals in the port of Santos, Brazil. February 25, 2015. Portal/Paulo Whitaker/FILE
Brazilian GDP grew by 1.2% in the second quarter of 2022above expectations, and urged the government to raise forecasts for this year to 2.7% a year from 2%.
“This growth was very surprising, but in part it has to do with it own overexpansionary fiscal policy that the government is campaigning for his re-election,” Borges said.
The market expects a slight growth of 0.50% in 2023. The slowdown, the economist pointed out, will also be a delayed reflection of monetary policy being implemented by the central bank to curb inflation.
“Monetary policy will have a stronger impact (on the economy) later this year and especially next year,” he said.
Illustrative file photo of 50 reais and 10, 20 and 50 dollar bills. September 10, 2015. Portal/Ricardo Moraes/FILE
HIGH INTEREST RATES AND INFLATION
The interest rate rose from 2% in March 2021, an all-time low due to the pandemic 13.75% this month the highest level since 2016.
The incessant raising of interest rates by the central bank managed to partially halt the rise in inflation that ended in August 8.7% YoY after two digits have been exceeded.
But price moderation also helped Bolsonaro announce controversially announced fuel tax cuts just months before the elections in which he will stand again.
(With information from EFE)
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