Guedes says in Davos that the country ‘did not sleep’ against inflation;  index hits 12%

Guedes says in Davos that the country ‘did not sleep’ against inflation; index hits 12%

Despite inflation in Brazil having exceeded 12% in the last 12 months, the Minister of Economy, Paulo Guedes, said this Wednesday (25) that Brazil “did not sleep” in the fight against inflation, unlike other countries. , and which is in a “very comfortable” and “solid” position in relation to its public debt. During the World Economic Forum event in Davos, Switzerland, Guedes also said that the country was underestimated during the covid-19 pandemic.

In a roundtable discussion, with the participation of the chief economist of the IMF (International Monetary Fund), Gita Gopinath, the minister defended that Brazil had problems with inflation “before developed countries” and that it also raised interest rates before them.

According to Guedes, the world went through a “formidable combination” of negative shocks, which boosted commodity prices. He cited changes in global trade as a result of the pandemic and rising food and energy prices.

In this context, according to Guedes, the central banks of the countries “slept at the wheel” when it came to acting against inflation. “Except for Brazil, on the monetary front [juros] and on the tax front [despesas]”, added Guedes, when asked if the country would be an exception.

Inflation continues even as interest rates rise

In March of last year, the Central Bank began the process of raising the Selic (the basic interest rate) to combat inflation. Since then, the Selic rate has risen from 2% to 12.75% per year, and the rate is expected to rise to 13.25% in June.

Even with the high interest rates, the most recent data from the IBGE (Brazilian Institute of Geography and Statistics) show that inflation accumulated in 12 months reached 12.13% in April. In March last year, when the BC started the process of raising interest rates, inflation was around 6%.

The acceleration of prices of products and services is not exclusive to Brazil, but the country is among the worst numbers. Brazil has the third highest inflation among the G20 countries, a group of the largest economies in the world, behind only Turkey and Argentina, according to data from the OECD (Organization for Economic Cooperation and Development).

For comparison purposes, in the 12-month period up to March, inflation in the United States reached 8.5% and that of the European Union reached 7.8%. Among the G20, average inflation is at 4.3%.

Brazil has a comfortable situation, says minister

During the event in Davos, Guedes also said that Brazil has a “comfortable” situation in relation to its debt.

“Internally, when Covid-19 came, a lot of people talked about the collapse of the Brazilian economy, even at the IMF,” Guedes said.

He recalled that projections pointed out that the Brazilian gross debt, due to the pandemic and the stimuli given by the government to sustain the economy, would walk above 100% of GDP (Gross Domestic Product). But gross debt reached only 78.5% of GDP in March this year, said the minister.

In fact, the most recent data from the BC show that Brazil’s gross debt reached just over R$7 billion in March, equivalent to 78.5% of GDP. In the historic low, verified in December 2011, during the government of Dilma Rousseff, the percentage was 51.3%.

Source: Uol

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