Broadcast: 01/16/2023
SPECIAL: FOCUS [Bulletin] REACTS TO RISK OF IPCA’S TARGETS REVISION WITH FISCAL FEARS AND BCB DIRECTOR’S INDICATION
According to the Armor Capital chief economist, Andrea Damico, the inflation expectation rise observed on the Focus bulletin reflects the domestic fiscal uncertainty, since the adjustment measures announced by the were limited to 2023 and do not assure debt sustainability in the medium and long terms. The analyst remarks that the stabilization of public debt would require a primary surplus between 1.5% and 2.0% of the GDP. This commitment has been signaled by the Economy Ministry yet.
“There is no confidence that it would be an additional adjustment in 2025 and 2026 to at least stabilize public debt, which might result in a further discussion to reduce the debt ahead”, says Damico. “The new fiscal rule will be crucial because there was already a loss of credibility of medium-term fiscal policy in the previous administration. If the new rule is feasible, the market tends to revise the deficit expectations and it may reduce the inflation expectations upward trend.”
