The increase in expenses proposed by the PEC da Transição, a project of the elected government that wants to include a new Bolsa Família at BRL 600 and other social programs in the 2023 Budget, should lead to a rapid deterioration in the conditions of the country’s public accounts, according to with a report released this Monday (21) by Banco Inter.
As a result, both the primary result and the evolution of the public debt should be worse than previously forecast for 2023 and for the years ahead.
In Inter’s estimates, government expenses should grow 5% above inflation in 2023, compared to 2022 – the account represents an increase of R$ 120 billion in expenses outside the spending ceiling for the year, reaching a total of BRL 190 billion beyond the established limit.
As a result, the primary result in public accounts should move from a projected surplus of 1.2% of GDP in 2022 to a deficit of 0.8% in 2023.
Spending in relation to GDP would return to close to 19%, “the highest value since 2019”, according to the bank, while public debt, which is expected to fall to 75% of GDP by the end of 2022, would rise to 81% in 2023 and would continue to increase until stabilizing around 94% in 2031.
“With the expected slowdown of the global economy and the lower GDP growth in Brazil, in addition to the recent tax exemptions implemented and the absence of privatizations in the new government’s plans, the good performance of the collection will not be repeated in 2023”, says the team of Inter’s analysis in the report to customers.
“This scenario requires more prudence in the management of expenses, which has not been the sign of the Transition PEC, which proposes excess expenses of up to R$ 200 billion. This level of expenses, without an associated counterpart, brings back a scenario of debt growth, which is already reflected in the high market interest rates”, he adds.
In the worst case scenario, although not the most likely in the analysis team’s view, the increase in the spending ceiling overflow could reach R$ 175 billion in 2023. In this case, the debt would reach 98% of GDP by 2031, instead of the 94% predicted in the baseline scenario.
In the most optimistic scenario, however, extra spending would amount to just R$70 billion in 2023, which would allow the public debt to stabilize at a level of 85% of GDP in 2028.
Source: CNN Brasil
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