Brazil close to top spot on list of countries with highest inflation in 2021 – OECD

RIO DE JANEIRO, BRAZIL – The consumer price index in Brazil should be among the highest globally, considering a list of countries selected by the entitiy of about 20 economies with projections released on Tuesday (21) by the OECD (Organization for Economic Cooperation and Development).

In 2021, only two countries among the 19 selected would have higher inflation than Brazil, Turkey (17.8%) and Argentina (47%).

The price index in Brazil is projected at 7.2%, falling to 4.9% in 2022, which would put the country with the fifth-highest inflation on the list, behind Russia and India, both with 5.5%.

The IPCA, the consumer price index measured by the IBGE and serves as the inflation target, is almost 10% in the 12-month accumulated until August. The latest market projection, considering the Focus report from the Central Bank, is 8.35% for this year and 4.1% for next year.

It is obvious that the list of countries compiled by the OECD is incomplete.

Here is the list of all countries that are all predicted to have higher inflation rates than Brazil in the current year:

Venezuela, Sudan, Iran, Suriname, Zimbabwe, Haiti, Yemen, Libya, Zambia, Nigeria, Sierra Leone, Uzbekistan, Angola, Liberia, Ethiopia, Guinea, Pakistan, Ghana, DR Congo, and Egypt.

The OECD projection for 2022 is practically at the limit of the target, which is up to 5%.

Commenting on inflation in emerging countries, the OECD states that considerable surprises in price indices are likely to persist for some time. Tighter monetary conditions, however, will help to limit domestic price pressures, especially in the second half of 2022.

According to the report, the growth projection for the Brazilian economy in 2022 was revised from 2.5% to 2.3% by the OECD. The previous forecast had been made in May. By 2021, it went from 3.7% to 5.2%.

These results would grow below the world average in 2021 (5.7%) and 2022 (4.5%). Next year, only two countries in a list of 20 nations would have lower results than Brazil: Japan (2.1%) and Argentina (1.9%).

In the report entitled “Keeping the recovery on track”, the OECD states that global economic growth accelerated this year, helped by strong support from fiscal and monetary policies, the progress of vaccination in some countries, and the recovery of many economic activities.

Global GDP has already surpassed its pre-pandemic level, but “recovery remains very uneven,” and activity is still 3.5% below the pre-crisis estimate for mid-2021. This represents a loss equivalent to one year of economic growth in regular times ($4.5 trillion).

In other words, the world has had a so-called “V-shaped recovery” in the level of activity, but this movement has left a hole in people’s income that has not yet been filled. “Closing this gap is essential to minimize the long-term scars of the pandemic via jobs and income losses,” says the OECD.

It says output and employment gaps remain in many countries, particularly in developing economies where vaccination rates are still low.

It says the economic impact of the coronavirus delta variant has been relatively mild in countries with high vaccination rates but has reduced short-term momentum elsewhere and increased pressures on global supply chains and costs.

For the OECD, governments need to secure all the resources necessary to vaccinate their populations as soon as possible to save lives, preserve income, and bring the virus under control.

In the OECD’s most optimistic scenario, the economy could grow by 6.25% in 2022 and return to pre-crisis trends, with faster progress in the distribution of effective vaccines, which would increase consumer and business confidence and spending.

In the most pessimistic scenario, the drop in the vaccination rate and a possible reduction in the effectiveness of current vaccines could lead to a new shutdown, and the world would grow by only 3%.

For the entity, it is also necessary to maintain the support of macroeconomic policies because the short-term outlook is still uncertain, and the labor markets have not recovered. However, it is essential to have a clear signal about the horizon and extent to which the rise in inflation will be tolerated and the planning towards the normalization of monetary policy.