The new crisis triggered by the elevation of the president’s tone Jair Bolsonaro against Federal Supreme Court (STF) during the demonstrations of September 7th and its repercussion in the political environment should not be restricted to the financial market – yesterday, the stock market fell 3.8% and the dollar rose 2.89%. As uncertainty increases, economic activity and inflation are likely to deteriorate further, according to economists.
“The (Tuesday) events put on the table the risk that Bolsonaro will not finish his term, either via impeachment or through impeachment. When this enters the radar, the uncertainties are greater, and this weighs on the economy, on consumption and investment decisions”, says the economist Alessandra Ribeiro, partner at Tendências Consultoria.
This more uncertain scenario is causing the economist to revise its high estimate for the GDP for 2022 from 2.2% to 1.8%. Alessandra says that there is a possibility that this growth will be even smaller. “There is also a risk in relation to the election result, especially if Bolsonaro doesn’t win. Then we can have a transition of power that is not peaceful. This brings more uncertainty and makes the environment more difficult for the economy.”
To chief economist at BV bank, Roberto Padovani, the demonstrations on September 7 made the 2022 electoral dispute and the uncertainties generated by it gain importance in the formation of Brazilian asset prices. As a result, market instability starts earlier than expected for an election period and the risk premium also rises.
“This makes it very unlikely that prices will converge to the level that would make sense according to (economic fundamentals). A fair value for the Stock Exchange today, for example, would be 130 thousand points, and for the dollar, R$ 4.70”, says Padovani.
According to him, the financial deterioration will raise the cost of credit, which will negatively affect the economy. For this year, Padovani still projects an increase of 5.3% in GDP, as the reopening of the economy will offset the uncertainties, but for 2022, the estimate is 1.8%, with a negative bias.
the economist Silvia Matos, from the Brazilian Institute of Economics, FGV (FGV Ibre), also states that its projection of 1.5% of GDP for 2022 has a negative bias. “We could be celebrating the results of the opening of the economy. But the scenario is now very uncertain. This harms investments, formal employment, credit. Many investment decisions will be left after the elections.”
Silvia says that the only breath can come from Congress. For her, given the crisis, deputies and senators may try, in the coming months, to advance some economic reform. “If the economy is really bad, maybe there’s more pressure for Congress to take the lead.”