Inflation forecast drops to 0.13%, lowest in two years

Sebastião Demuner, from Corecon-ES, evaluates the economic scenario for the second half of the year after the fall in the preview of inflation

by Amanda Amaral

Two years ago, the monthly rate of the Extended National Consumer Price Index 15 (IPCA-15) did not fall. However, in July 2022, the country’s official inflation preview registered 0.13%, indicating a deceleration compared to the previous month (0.69%) and the 12-month period (0.72%).

This is the lowest monthly IPCA-15 rate since June 2020 (0.02%). The data were released this week by the Brazilian Institute of Geography and Statistics (IBGE). The indicator accumulates inflation of 5.79% in the year and 11.39% in 12 months.

The result in July was influenced by falls in fuel prices (-4.88%), especially gasoline (-5.01%) and ethanol (-8.16%), which also influenced the transport sector , which registered deflation (price fall) of 1.08% in the period. In the preview of June, the group had registered inflation of 0.84%. Communication (-0.05%) and housing (-0.78%) also recorded a fall in the month.

ICMS rate

For the member of the Regional Council of Economy of Espírito Santo (Corecon-ES), economist Sebastião Demuner, the drop in prices is a reflection of Complementary Law 194/22, which limits the rates of the Tax on the Circulation of Goods and Services to 17%. (ICMS) for fuels, natural gas, electricity, communications and public transport.

“There is a relationship with the ICMS law. The limitation was a good move and is being copied by the international market, I don’t know how it took them to have this perception. The states lost, but not effectively, because in fact they failed to win. The collection was being done in excess. Maybe next year they can feel it if the price of oil drops. But then a new discussion is possible,” he commented.

Projections for the market

For the economist, the trend for the Brazilian market in the second half of the year is one of confidence. According to the latest projection of the Central Bank’s (BC) Focus Bulletin, the projection for 2022 inflation dropped for the fourth time in a row, from 7.54% to 7.30%.

“Brazil’s growth expectation for 2022 was 0.6% and now it is 1.9%”, evaluated Demuner, who believes that, even with the expectation for the next presidential elections, in October, the market should remain stable.

“Anywhere in the world, elections impact the market. Perhaps, when they are elected for the first time, presenting a new project for the country, but in the case of Brazil, the two candidates who are ahead of the polls do not bring the unknown, the market already knows them. But the elections could have an impact on the exchange market, forcing the dollar to rise, because there is still an expectation on the part of investors, but barring speculation, Brazil is doing very well, and the market should remain stable,” he said.

Forecast for 2023

The expectation is positive for the second half, according to economist Sebastião Demuner. Photo: Disclosure

However, the expectation is still negative for 2023, warns the economist. Analysts at the Bulletin Focus this week projected a drop for next year’s Gross Domestic Product (GDP) from 0.50% to 0.49%.

“Where will the government get resources from? The trend is public deficit, to start selling debt securities. It’s going into debt to be able to honor the debt now. But if industrial production and the economy continue to grow, with the help of the world economy, this situation can be reversed, relying on revenue, which in Brazil continues to rise”, explained Demuner.

Rising food sector

The biggest impact of this month’s inflation preview came from the food and beverage group, with prices rising 1.16% in the period, up from 0.25% in the June preview. Among the foods that most increased in value is long-life milk, which rose 22.27% in the period.

Dairy products also had inflation: requeijão (4.74%), butter (4.25%) and cheese (3.22%). Other products that stood out were fruits (4.03%), carioca beans (4.25%) and French bread (1.47%).

Returning to fuel, it is also worth mentioning that airline tickets rose 8.13%, according to the IPCA-15 of July.

With information from Agência Brasil

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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