Brazil Economy Minister forecasts rising inflation and fears political risk

RIO DE JANEIRO, BRAZIL – A year ahead of presidential elections, the head of the economic team also said he fears the impact of political risk on financial markets.

“Yes, inflation will rise, but monetary policy is there to contain price hikes,” Guedes replied to a question about inflationary pressure in Brazil. According to the Minister, half of Brazil’s inflation currently comes from food and energy prices.

Guedes said that Brazil has a “vibrant” democracy, but that there is much “political noise.” He said that there is a “group” in the country that lost the 2018 elections, but “does not accept the result,” in a suggestion that opponents are trying to sabotage the government.

During the interview, the Minister criticized projections for the Brazilian economy, said the estimates will prove wrong, and forecast that the country’s Gross Domestic Product (GDP) will grow 5.5% this year. “Growth will not be a problem. The problem is inflation,” he declared.

In the most recent Focus Market Report, released on Monday, October 11, the median forecast for the Gross Domestic Product (GDP) for 2021 was maintained at 5.04%, the same estimate as 4 weeks ago. The International Monetary Fund slightly reduced its projection for Brazil’s growth in 2021, from the 5.3% estimate released in July to 5.2% now.

According to Guedes, Brazil will experience strong recovery after the effects of the Covid-19 pandemic because the progress of vaccination will allow people to safely return to work. He further said that the country’s regulatory structure has changed and that, therefore, Brazil is now “open for business.”

Guedes is in the U.S. to attend meetings of the International Monetary Fund (IMF) and the group of the world’s 20 largest economies (G20), of which Brazil is a member. Earlier, the Minister also gave an interview to CNN International and discussed inflation, growth, pandemic and vaccination, offshore companies, and the green growth plan for Brazil, to be presented at COP26 in Scotland next month.