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On Tuesday (12/07), Economy Minister Paulo Guedes said that the Constitutional Amendment that stablishes a state of emergency to create social benefits in an electoral year does not have fiscal impacts this year. The impact of the proposal on the budget could reach R$ 41.2 billion, however, according to Guedes, the costs will be paid with extra revenues generated by a beyond the expected tax collection and extraordinary results from dividends provided by state companies.
Breaching the Fiscal Limit 5 Times
Since 2019, Jair Bolsonaro administration and the National Congress have completed five major changes to the spending limit. This is the country’s main fiscal rule, responsible for limiting expenditure growth to the previous year’s inflation. Now, the changes add up to a fiscal impact of R$ 213 billion in relation to the original design of the rule, according to a survey carried out by the Independent Fiscal Institution (IFI), a body linked to the Senate. For experts, the flexibilization of the rule so many times led to a loss of fiscal credibility and partially explains the dollar price increase and negative result in the Brazilian stock exchange market (Ibovespa).
Fiscal Bomb
According to the Economy Ministry’s projections, the governmental measures implemented this year reduced the inflation forecast for 2022, from 7.9% to 7.2%, and raised the estimate of GDP growth, from 1.5% to 2%. At the same time, for 2023, the inflation forecast rose from 3.6% to 4.5%, while that for GDP remained stable at 2.5%. For specialists, this is an indication that the fiscal deregulation created near the elections is a bomb for the next year. They believe that there can be lasting effects on the economy: increased public spending, market distrust of fiscal policy; pressure on the interest rate; rising inflation; and fiscal difficulties for whoever takes over the government in 2023. Therefore, this scenario can increase poverty and misery, possibly reverting the effects of the benefits from this year.
