Economists interviewed by the g1 say that the measures taken by the federal government and the National Congress to eliminate federal taxes and duties on fuel by the end of this year may even contain inflation in 2022, but should put pressure on prices in 2023.
In March, for example, Congress passed — and Bolsonaro signed into law — the law that until the end of this year brought federal taxes on diesel and cooking gas to zero.
In addition, the law limiting ICMS, a state tax, on various items, including fuel, was also enacted. This year, the text eliminates federal taxes on gasoline, alcohol and Natural Vehicular Gas (CNV). In all cases, taxes go up again in 2023.
The National Monetary Council (CMN) has already defined that the inflation target for 2023 is 3.25%. The target will be considered fulfilled if it fluctuates from 1.75% to 4.75%.
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The president of the Central Bank, Roberto Campos Neto, however, admitted last week that inflation in 2023 will be above the center of the target, that is, above 3.25%, but added that the institution will adopt measures to try to leave the inflation below 4% (see details below).
Brazil broke the inflation target ceiling in 2021, and the Central Bank already expects to break the target ceiling again in 2022. This is because the central target is 3.5% and will be considered fulfilled if it fluctuates between 2% and 5 %. However, the projection of the Central Bank itself is that it stays at 8.8%.
At the end of the day, the Central Bank says that inflation persists and interest rates will remain high
Pressure ‘will continue to exist’
The Independent Fiscal Institution (IFI), linked to the Senate, says the measures could reduce inflation in 2022 by 2.8 percentage points, from 8.6% to 5.8%. However, still in the assessment of the IFI, the pressure on prices ‘will continue to exist’.
Under this scenario, the agency calculates, inflation in 2023 could reach 5.2%, that is, above the target ceiling for the third consecutive year.
“The projects do not guarantee [queda dos preços]because the pressure will continue to exist”, declared Daniel Couri, interim executive director of the IFI, noting that, since 2016, in the Michel Temer government (MDB), Petrobras has followed the international price criterion.
In the same vein, Gustavo Sung, chief economist at Suno Research, says that zeroing fuel taxes can generate “relief” in inflation in the short term, but from January 2023 prices will rise again.
“In the medium term, this measure has direct impacts on inflation. As the project ends in December 2022, in January 2023, fuel prices will rise again. With the loss of revenue and compensation to the states, the fiscal scenario tends to deteriorate”, he evaluated.
For Sung, it is still “too early” to say that inflation will be above the target ceiling in 2023, but that there will, yes, be a “transfer” of inflation from this year to the next.
“And this transfer of inflation from 2022 to 2023 is an extra factor that generates instability,” he added.
Impact on inflation in 2023
Luis Otavio de Souza Leal, chief economist at Banco Alfa, says the bill passed by Congress could reduce inflation by 1.5 percentage points in 2022, falling from 8.5% to 7%, but generating a rise of 0.4%. percentage point in 2023, rising from 4.2% to 4.6%.
The analyst evaluated that it is not possible to say, yet, that the ceiling will not be exceeded in 2023.
“I think the biggest truce comes from industrial goods. The bottlenecks are not resolved in the coming months, at least they will be minimized and, more importantly, world growth will slow down sharply with the main BCs raising interest rates”, he declared.
Roberto Campos Neto, president of the Central Bank, in an image taken on May 25, 2022 — Photo: Antonio Molina/Fotoarena/Estadão Content
What does the Central Bank say?
According to the minutes of the last meeting of the Monetary Policy Committee (Copom), the Central Bank reported that it estimates inflation of 4% for 2023.
Considering the tolerance of 1.5 percentage points more or less, if it stays at 4%, inflation, defined at 3.25%, will be considered fulfilled next year.
Questioned by g1BC President Roberto Campos Neto stated that the institution has not yet released a precise calculation of the impact of tax measures next year, as they were recently approved by Congress.
Even so, the BC reported that it seeks inflation below 4% next year. Because of this, he announced that it will be necessary to raise interest rates further, and also keep them high for longer.
“Our strategy was not a response to the measures [tributárias]. We analyze the scenario, inflation expectations, surprises and dynamics [inflacionárias] short and medium term. The combination of what was done [elevação da Selic e indicação de juros altos por mais tempo] is not a response to one factor or another”, declared Campos Neto.
The containment of fuel prices in an election year already happened in 2014, when then-President Dilma Rousseff (PT) ran for re-election and won the race.
That year, inflation was 6.41%, but in 2015, after prices were released, it rose to 10.67%, the highest level in 13 years.
Bolsonaro also criticized the company, saying that Petrobras “does not collaborate with anything”. He also classified the profit recorded by the state-owned company as “rape”.
At the end of May, Bolsonaro announced a new change at the helm of Petrobras, the third replacement since 2019 and the second in the last 40 days.
Recently, former president Lula, PT’s pre-candidate for the presidency, said that the Jair Bolsonaro government’s proposal to reduce the ICMS on fuel will not lower the price for consumers.
He also said that Bolsonaro should have “courage” to determine that Petrobras stop passing on the international rise in prices to consumers.