Market already forecasts GDP growth below 1% in 2022

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The worsening of the economic situation, with an increase in the inflation and a high political risk, has made economists from financial institutions reduce their Gross Domestic Product growth projections (START) for this year and next year.

After the result below the expected of the START In the second quarter, Itaú Unibanco reduced on Tuesday its expectation of activity growth in 2021, from 5.7% to 5.3%. In light of the higher interest rate scenario, the bank also lowered its projection for 2022, from 1.5% to 0.5%.

Itaú assesses that the fiscal risk has increased with the prospect of increased public spending and, if this materializes, it would bring negative effects to the economy. The bank observes that the unexpected increase in spending on court orders makes it difficult for plans to reconcile an increase in Bolsa Família and the maintenance of the fiscal anchor in the country.

In a report published on Tuesday, Itaú Unibanco also raised its projections for the Selic rate — the country’s basic interest rate — at the end of 2021, from 7.5% to 8.25%, and in 2022, from 7. 5% to 9.0%, due to the more pressured inflation scenario. The bank also raised its forecast for the Broad National Consumer Price Index (IPCA) this year, from 7.70% to 8.40%, and next year, from 3.90% to 4.20%. The indicator measures the country’s official inflation.

“The water situation creates additional pressure on current inflation, via an increase in electricity bills, and also on the price dynamics for the coming year, through the inertia resulting from a higher IPCA and the risk of new measures aimed at reducing In addition, doubts about the trajectory of public accounts, especially with regard to compliance with the spending ceiling in 2022, result in more lasting pressure on the exchange rate, which should appreciate a little less than we expected before”, writes the chief economist of Itaú, Mario Mesquita, in a report.