After the New Year’s hangover, no one deserves to read a pessimistic column to start the year. However, I regret to inform you that we face another difficult year ahead due to deteriorating economic conditions and increasing political uncertainty.
The global scenario will be volatile and challenging, primarily due to a global rise in inflation and monetary policy tightening led by the central banks of England and the United States (irrigated) and Canada. In addition to completing its asset-buying program in March, the Fed will likely raise interest rates by 1% in 2022 and 1.5% in 2023.
US monetary policy tightening will reduce net capital inflows to emerging economies, will appreciate Dollar, and will devalue Real, In addition, the new wave of Covid-19 will reduce US growth to 3.5% and China’s GDP growth rate will reduce by 4.5% if the housing bubble bursts. For the world economy, this means that global GDP growth will fall from 6% in 2021 to 4% in 2022.
Fortunately, our external accounts are solid, which will help us face the most difficult external scenarios in terms of 2022 elections, Unfortunately, this does not apply to tax accounts. Although the public debt to GDP ratio fell to 81.6% in 2021, it is likely that, in 2022, the dynamics of public debt will worsen, due to a strong rise in real interest rates, stagnant GDP and increased elections. primary loss.
In 2022, the public accounts will be our Achilles tendon. Depending on who is leading the election, public debt dynamics are likely to worsen and expectations for inflation Uncorrelated, further pushing up both long and short interest rates. Political uncertainty and a multitude of poor electoral scenarios will heighten the country’s risk and devalue the real.
The presidential race will only begin in June. At the moment, the starting grid is disappointing, as it suggests that we will be the same heroes with whom Brazil has already lost the global race for growth, productivity, innovation and prosperity.
We Brazilians are optimists. But at the moment, the third kind of scenario is more a psychological comfort tool than a reality. Without the participation of opinion makers and those who wish to contribute to making the country better, perhaps we will reach 2023 and feel at home for 2021.
*Professor of Finance at the University of Miami and Chairman of the Global Allocation Committee, XP Private