In a report, Inter reviews the permanence of inflation and high interest rates in 2023

The increase in fiscal risk should keep inflation high for a longer time, close to 5% in 2023, as well as the monetary policy, which should also be kept at higher levels for a longer time, until the beginning of the 2nd half of 2023, according to a report published on Wednesday (14), by Inter.

In addition to inflation, the document also revised expectations for interest rates in Brazil next year. “We revised our Selic expectation for the end of the year from 9.5% to 12%, with expectations of high inflation and the risk of a new fiscal expansion”, says the report.

The institution also projects a real growth in public spending of 6% in 2023, forecasting a primary deficit of 1.2% next year with debt growth from 74% to 79% of the Gross Domestic Product (GDP).

In Inter’s assessment, the more restrictive monetary policy should offset the fiscal worsening, further slowing down economic activity. “GDP growth is expected to go from 3% in 2022 to 0.5% in 2023, with a risk of recession in the first half of the year”.

One of the main risks for next year pointed out by the report is the proposed expansion of fiscal expenditures brought in the PEC of the Explosion, which could raise the trajectory of the public debt.

Inter claims that spending control was important for the adjustment observed in recent years, even though additional spending was made during the pandemic. “The high tax burden is an impediment to a new adjustment via tax increases”, warns the bank.

Regarding employment, the analysis is that the “good performance of the economy resulted in a strong increase in the labor market”, with the unemployment rate reaching
minimum since 2014, at 8.3%. In this context, the institution expects a slight increase in 2023, to around 8.5%.

“Once the impact of inflation has passed, the average real income recovered again and should support consumption in 2023, despite more restrictive interest rates”.

Source: CNN Brasil

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