With an energy surcharge, IPCA should reach 8.2% in 2021, economists say | Brazil

THE new tariff flag gives “water scarcity”, announced by the Ministry of Mines and Energy (MME), he must speed up O Broad National Consumer Price Index (IPCA) for 8.2% this year, according to economist André Braz, coordinator of Price Indices of the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre). The surcharge should be in effect between September this year and April 2022.

This Tuesday, the Ministry of Mines and Energy and the National Electric Energy Agency (Aneel) announced the creation of a new tariff flag, even more expensive than red 2, currently in effect. The so-called “water scarcity” flag will cost BRL 14.20 additional for every 100 kWh consumed, against R$9.49 of the current brand red 2.

“With the tariff [adicional] going from R$ 9.49 to R$ 14.20, we have an increase of 49.63%, which means an energy bill on average 7.35% more expensive”, he says.

“This increase from September would have an impact of 0.23 percentage point on the IPCA.” With that, says Braz, the inflation projection for September will go from 0.6% to 0.83%. the projection of the annual inflation rate for 2021 goes from 7.8% to 8.2%, he claims.

With the new flag, the Armor Capital increased its projection for the IPCA in 2021 by 0.30 percentage point. Adding to this another 0.10 percentage point due to the perspective that the month of August would already be more pressured, the end of year estimate went from 7.7% to 8.1%, according to the chief economist, Andrea Damico. For 2022, the projection went from 4.2% to 4.4%, due to the “greater inertia of services”, says Damico.

THE AZ Quest had already updated its IPCA forecast in 2021 to 7.5% and, with the announcement of the new tariff, raised to 7.7%. The September estimate went from 0.57% to 0.80%. “In 2022, there may even be downward pressure if there is a reduction in the tariff next year. However, we are going to maintain the forecast of 3.7% for next year, with an upward trend, due to the uncertainty regarding the evolution of the water crisis”, says chief economist Alexandre Manoel.

He assesses that the increase given by the government is in the right direction. “We are going through a secular water crisis, our energy dispatch model is pricing water wrongly, it is up to the government to try to fix this underestimate with a tariff increase, when we are in a critical period in terms of rain”, he says. According to Manoel, it is “fundamental to price water properly to avoid going through this tension of imminent rationing or systematic blackouts every time it doesn’t rain or it rains less than expected”.

THE Amounts had already incorporated the 50% increase in its projections, says chief economist Ivo Chermont, who expects an IPCA of 8% this year and 4% in 2022. Fábio Romão, from LCA Consultores, was also already working with the hypothesis of a tariff going from R$ 9.49 to R$ 14.20, which added 0.30 percentage point to the previous projection of the house, which was 7.4%. “In light of this new charge, which we have already put on the scene, our projection is at 7.7%,” he says.

For him, the new tariff does not necessarily change the annual rate of the 2022 IPCA. “It can, of course, change the expected monthly rate for the first four months of the year, but if you close the year (December) in the already projected banner – the LCA, for example, has a yellow flag for December 2022 – the annual rate remains the same”, explains Romão, who forecasts an IPCA of 4.1% for next year.

At Renaissance, a projection for inflation this year went from 7% to 7.6%. “For 2022, for the time being, we have opted for a much more subtle change, from 4% to 4.1%”, says economist César Garritano. In the analysis by groups, comparing 2022 with 2021, he says he expects a slowdown in food and beverages (mainly food at home), transport (especially fuel) and housing, with the expectation of some drop in electricity. “We should see a slowdown in prices for monitored goods and also for industrial goods in 2022,” adds Garritano.

In addition, the slowdown in economic activity in 2022 and an unemployment rate still at high levels should also act to reduce inflation, but Garritano ponders that next year “we will have elections and a series of factors may affect the macroeconomic variables”.

THE Neo Investimentos maintained the 2022 projection at 3.8%. “It hasn’t changed, but it could have changed a little bit down, with the return of those high flags”, says the chief economist Luciano Sobral, who prefers to wait “to see how the rainy season starts”. THE estimate for 2021 was already at 8% since last week, when the first news about the 50% increase in the flag appeared.

THE Genoa Capital promoted this downward adjustment in inflation in 2022, from 4% to 3.9%, but raised the 2021 estimate from 7.5% to 7.7%.

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