GDP dismantles and the challenge of hitting the hand is imposed on the Central Bank


The market has already turned the converter and the pace of expansion of Gross Domestic Product (GDP) starts to converge to zero. This is the signal from economists from banks and consulting firms. But the alarm that rang loud in the financial market was triggered by the Itaú Unibanco, which, on Tuesday, cut its growth estimate for Brazil in 2022 from 1.5% to 0.5%. This projection, shared by other institutions, is equivalent to a fifth of what was expected in January, when 2.50 % was the variation shared by most households.

despite the political tension that permeates the analysis of experts, size adjustment of projections — which, according to the research Focus, declined 0.40 percentage point in just two months — it doesn’t happen without a heavy monetary consideration. The policy multiplies the noises that more than pressured inflation issues. O monetary tightening it has been underway for six months and its effects are beginning to be felt in earnest from now on due to the prescribed period between the decisions taken by the Central Bank (BC) and the repercussion in the activity.

The Selic rate soared from its historic low of 2% in March to the current 5.25% a year. And it should reach 6.25% next week – when the Monetary Policy Committee (Copom) holds its sixth meeting in 2021. It will therefore be two meetings away from the end of the year.

The next move of the Cup was signaled by him. O central bank (BC) continues to indicate, in its documents, the maintenance of the pace of adjustment of the basic rate, which entered the cadence of increase of 1 percentage point almost 45 days ago. Yesterday, during the event MacroDay, promoted by BTG Actual (from the same group that controls the EXAM), the president of the institution, Roberto Campos Neto, reinforced that the BC’s priority is the inflation and, therefore, the fulfillment of the target regime. However, he noted that the committee will not react “always to high frequency data”.

It is undeniable, however, that the inflation escalation, which in the 12 months ending in August reached 9.68%, compared to 4.56% in January, it is not trivial. To Copom and, therefore, to the command of the BC, next Wednesday, 22, the challenge of meeting market expectations with an adequate Selic adjustment so that the activity does not fall apart altogether and contract a new cycle of retraction – disastrous for the government in an election year.

Services sector helps, but doesn’t solve

In a report, the Itaú Unibanco is explicit. “We revised our GDP growth forecast from 5.7% to 5.3% in 2021 (after the release of second quarter GDP and recent data) and from 1.5% to 0.5% in 2022 (due to the higher interest rate)”, he says. Mario Mosque, chief economist and former director of economic policy at the BC.

He recognizes that GDP growth should improve in the second half of this year, especially due to the expected standardization of service sectors that depend on social interaction. However, the growth factors are running out. And here comes the interest rate. But Itaú sees ahead a fiscal policy also contractionary, even taking into account the new income transfer program, as the public spending primary is expected to fall back to a level close to that observed in 2019 in real terms.

We see a slowdown in the global industrial sector and falling commodity prices next year. In addition, economic activity will no longer benefit from the boost arising from the reopening of the services sector, something that, in our view, will be restricted to the second half of this year”, says Itaú.

A National Association of Credit, Financing and Investment Institutions (Acrefi) this morning released its new forecast for GDP expansion of 1% for 2022. Nicola Tingas, the entity’s chief economist, attributes the deterioration of expectations and projections to the combination of uncertainties, risks and crises. “Inflation close to 10% at the peak in 12 months, Selic with slow correction by Copom, energy crisis and probable rationing, unrealistic public budget that still awaits voting, payment of unresolved court orders, controversial and also pending tax reform, financing of the Brazil Aid uncertain, institutional political crisis and depreciated exchange rate due to country risk.”

A MB Associates, which reduced its projection for the GDP of 2022 from 1.4% to 0.4%, warns that the re-reading of the indicator “maybe not the last”. Sergio Vale, chief economist at the consultancy, recalls that downward revisions were widespread among the segments, with the exception of agriculture, whose projection rose. “Expected a better crop than this year with a certain normalization of the rainfall regime for agriculture, despite a possible weak La Niña that we will have. This is different from the rainfall regime required for reservoirs in the case of a water crisis. At rains will be good for agriculture, but probably not so much for solving the energy crisis”, he says.

As indicated by economists consulted by the EXAME IN, there is no good way out of the current scenario of strongly pressured inflation and with the threat of aggravation of the water crisis, also because the consequences of the next monetary decisions will focus – in addition to the elections – the autonomy achieved by the BC of Roberto Campos Neto.

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