Global economy will grow 5 times more than Brazil in 2022, says OECD
The Brazilian economy is expected to grow by just 0.6% in 2022, while the world economy will grow by 3%, according to a study by the Organization for Economic Cooperation and Development (OECD) released this Wednesday (8/6).
High inflation, the war in Ukraine, the slow recovery of the labor market and political uncertainties due to the presidential elections in October are some of the factors that contribute to the “considerable slowdown” in economic activity in the country, in the assessment of the entity. .
In its semi-annual study with forecasts for the world economy, the OECD revised downwards the estimates of growth of the Brazilian GDP (Gross Domestic Product) in 2022. The forecast was for an increase of 1.4% in the last report, released in December.
Projections for global GDP expansion this year were also reduced from 4.5% to 3% due to the effects of the Russian invasion of Ukraine. “The price of war can be even higher. The conflict affects the distribution of staple foods and energy, fueling high inflation around the world, threatening the poorest countries in particular,” says OECD chief economist Laurence Boone in the document.
The Brazilian economy will grow less in 2022 than that of several Latin American countries, such as Colombia (6.1%), Argentina (3.6%) and Mexico (1.9%), according to estimates.
The OECD points out that, despite Brazilian commodity exports gaining strength, high inflation – which is expected to reach 9.7% this year, according to the organization’s calculations – hinders the expansion of consumption, affecting the performance of the economy.
Presidential elections add uncertainty, helping to keep investments below potential until next year, the study says. In 2023, the Brazilian economy is expected to grow 1.2%, predicts the OECD.
According to the organization, due to the deterioration of the economic climate in Brazil, growth forecasts are limited this year and next. Inflation and monetary tightening, with rising interest rates, restrict domestic and foreign demand. In addition, wages are not recovering fast enough to compensate for the end of emergency aid during the pandemic and the rise in prices, the study says.
Inflation in Brazil is expected to begin to ease as currency tightens and uncertainty eases after the presidential election, but will pick up again in early 2023, the report says, when Russia’s European oil embargo takes effect.
“Inflation in Brazil will remain high in 2023 and should not reach the target in the projection horizon,” says the report released this Wednesday.
Furthermore, the protracted war in Ukraine would continue to drive up the costs of agricultural inputs such as fertilizers, “severely restricting agricultural production and exports.”
In order to maintain fiscal sustainability and combat the increase in poverty rates in the country, Brazil needs, in the OECD assessment, to continue the “ambitious reforms that were initiated to improve productivity and employment.”
In the assessment of the Paris-based entity, more efficient public spending would allow “strengthening the fiscal framework in the medium term, which would create space for productive public investments and well-targeted social aid, in addition to reinforcing investor confidence.”
“As the war in Ukraine has led to a sharper rise in food and energy prices, bolstering support through well-targeted social programs is critical to protecting the most vulnerable,” the study says.
The study with forecasts for the world economy was released on the eve of the OECD’s annual ministerial meeting, where the process and conditions for joining new members, including Brazil, will be discussed. The meeting will be attended by the Ministers of Economy, Paulo Guedes, and the Civil House, Ciro Nogueira.
The environmental practices and policies of Brazil and the other candidates are part of the conditions for joining the organization. The aspects that will have to be fulfilled in this area and in other subjects can be approved in this ministerial meeting with representatives of the 38 member countries.
In the study released this Wednesday, the OECD recommends that Brazil “duly enforce” laws that prevent illegal deforestation “to protect natural resources such as the Amazon.
The OECD also recommends that Brazil explore more alternative sources of energy, such as wind and solar, and increase investments in public transport systems, which would benefit low-income workers and reduce air pollution and dependence on automobiles, the document says.
Source: BBC News Brazil