Bloomberg Línea: 03/21/2023
Fiscal Framework: market’s doubts about the rules proposed by the government.
To economists, the new fiscal rules aren’t enough to reach the projections shown by the government, which suggests that there might be an increase in taxes.
The presentation of the new Fiscal Framework this Thursday (30) left doubts among economists in the financial market, consulted by Bloomberg Línea. The main one, highlighted by most of them, is that the new rules, on their own, are not enough to get to the trend of Debt/GDP and the Primary Result presented by the Finance Minister, Fernando Haddad.
Another possibility, as Andrea Damico – partner, and chief economist at Armor Capital, affirms, is that the government’s projections are considering a far too optimistic model of economic activity growth in the coming years, which would take to an increase in tax collection. That would also lead to a reduction in the Selic rate, to a level lower-than-expected, reducing the interest account of the government.
“With our activity number, we cannot reach these same numbers presented on the debt trend”, the economist says. A stabilization of debt could be reached, according to her, through an extra receipt of R$100 billion to R$150 billion [US$20 and US$30 billion] which could come from the taxation of dividends, that has not yet been discussed. “With the income reform, we could stabilize debt in the coming years, in the medium term. This is a reasonable outcome.”
The economist highlights that, objectively, the new rules are positive and show a commitment to the stabilization of debt growth – an evaluation that is also shared by other specialists surveyed by Bloomberg Línea.
Damico compliments the fact that the government created a ceiling for the spending growth (2.5% above the inflation) and the limitation of the spending growth in the proportion of 70% of the revenue growth. However, the lack of plainness about the calculations used by the government left doubts.
