The Minister of Finance, Fernando Haddad, admitted today (14), in São Paulo, that the government may review, once again this year, the projection for the 2024 Gross Domestic Product (GDP).
“Maybe we have to review it, not yet, but maybe we have to review this year’s GDP once again,” he said.
For Haddad, Brazil should not grow below the world average this year. He also stated that it is possible for the country to maintain an average growth of 2.5% in the long term – and without risks. “From my point of view, there is no reason not to aim for a growth rate at least equivalent to the world average. We have been well below the world average for many years. And I think that Brazil can aim for an average growth rate above 2.5%, without any risk, in my opinion, of important imbalances.”
This morning (14), Haddad participated in the Itaú BBA Macrovision event, held in the capital of São Paulo and one of the most traditional events in the financial market. During the event, he also stated that this year’s inflation should remain within the target’s tolerance band.
“Inflation – despite the significant supply shock, due to lack of water, which impacts the production of food and electricity; and the disaster that happened in Rio Grande do Sul, which was faced, in my opinion, very proficiently – even with all these shocks, we are discussing whether inflation will stay within the band ceiling or not. In other words, we have some prospect of still staying within the ceiling, that is, lower inflation than last year”, he said.
During the event in the capital of São Paulo, he also projected that Brazil could reach investment grade by Moody’s in 2026. In early October, Moody’s raised the rating of Brazil from Ba2 to Ba1. “I think we are on a path that can give us investment grade by 2026. If we get it right, we will achieve it. We were three steps below investment grade when we took office. What has been done so far has given us two steps, which are not guaranteed, by the way. Because if you make a mistake, you will lose. So, to maintain and guarantee the positive bias, which is kind of half a step, then two and a half, I believe the recipe is established.”
Income tax
Asked about the Income Tax reform proposal, the minister stated that he does not believe it is possible for it to be sent to the National Congress this year.
“In the case of Income Tax, the studies are much more preliminary, within the government and within parliament. So, there is work to be done. And we want to get it right. We want, both from the point of view of consumption and income, to bring Brazil closer to the best in the world”, he said, adding that “I don’t know if it will be possible to do it this year, especially because we have a calendar tight and with unfinished tasks that we would like to deliver this year, such as the Planning and Finance spending review program”.
According to the minister, the Income Tax reform needs to guarantee that it will be neutral in terms of rate. “The neutrality of the reform must be guaranteed so as not to have any fiscal risk associated with either consumption tax or income tax. So, the assumption of the reform is that, for the reform to come about, it has to be neutral. Fiscal adjustment has to be somewhere else, it has to be sought in another way. The reform itself, both regarding consumption and income, has to be neutral, otherwise it will not pass.”
Concern about a more conservative world
Also during the event, the minister stated that he was worried about the result of the municipal elections in the country. According to him, the elections in Brazil and the global panorama have demonstrated that conservatism and anti-scientific discourse are gaining strength.
“I was worried about the result, but not just in Brazil,” said the minister. “I believe that the world is much more conservative and much more dystopian than we imagine. Today there is room for all types of rhetoric. What seemed improbable 10 or 20 years ago, improbable from a rhetorical point of view, today there is room for any narrative. Even people who eat with a knife and fork have spoken out against vaccines and climate change. This is a situation that worries me. This speech is gaining strength, it is not losing strength. We thought he would stay behind”, he said.
For him, the “dystopian, anti-scientific and anti-democratic discourse” regrettably continues to have space in Brazil today. “I place myself on a political-ideological spectrum that worries about this, because this is not going to take us to a good place.”
For Haddad, the country’s prosperity will only be achieved by focusing on science, democracy and freedoms. “We will be increasingly tied to the question of science, the question of empirical evidence, the question of freedoms, the question of respect for difference. And that is what will make Brazil prosperous. The economy is made up of a whole that needs to function. I am very institutionalist in the way I see the economy. I think that designing good institutions is the secret to more satisfactory economic performance. And, obviously, science has to be part of this project. I have never seen any country move forward denying scientific evidence or denying the recommendations of science.”
