Focus: market projects economic growth of less than 1% in 2022

Decreasingly, the financial market’s expectation for the performance of economic activity in 2022 is already a slight increase of 0.93%. Although it is the sixth consecutive reduction in the projection, this is the first time the threshold is below 1%. Four weeks ago, the expected growth was 1.50%.

The numbers are from the Focus Bulletin of the Central Bank (BC), released this Tuesday (16). The document brings together the estimates of more than 100 financial market institutions for the main economic indicators.

At the same time, the average forecast of financial agents for the Gross Domestic Product (GDP) 2021 also fell again, from 5.01%, a month ago, to 4.88%.

Inflation keeps advancing

On the other hand, inflation estimates for this and next year continue to rise. For 2021, the forecast for the Extended Consumer Price Index (IPCA), the country’s official inflation, increased from 8.49% to 9.77% in one month. In the same period, the expectation for the IPCA in 2022 increased from 4.18% to 4.79%.

According to the inflation target set by the National Monetary Council (CMN), the IPCA should not exceed 5.25% this year. The target center is 3.75%, however, the 1.5 percentage point tolerance margin up or down allows the index to vary from 2.25% to 5.25%.

This Tuesday (16), the president of the Central Bank, Roberto Campos Neto, commented, in Lisbon, that this is the first time that Brazil has suffered internal inflationary pressure and, at the same time, imports inflation from other countries.

“It took us a while to understand where the problem really was. What we see is a huge rise in world inflation. (For the post-pandemic,) World trade was organized to minimize inventories and make as much inventory efficiency as possible and maximize comparative advantage,” he said.

“This means that each country produces what it has a comparative advantage: I will go back to doing things where I don’t have a comparative advantage. It’s worrying. (Means) Lower growth and less efficiency down the road. Governments were slow to understand. The volume of resources placed was very large”, added the head of the monetary authority.

In recent months, the BC has been working on raising the basic interest rate, the Selic, which is the main monetary instrument to control high inflation. At the moment, the rate is at 7.75% per annum. The market already expects the Selic to end 2021 at 9.25% pa and reach 11% pa in 2022. The next meeting of the Monetary Policy Committee (Copom) will take place on December 7th and 8th.

*With information from Teo Cury