If the goal becomes impossible to achieve in the coming months, the British Bank says that maintaining the goal would be better than changing it
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The delivery of the 2024 Annual Budget Act (PLOA) proposal to Congress last week – with expectations of a zero primary deficit – did not change the scenario for Barclays, which still expects a 1% gap of GDP in the Brazilian central government’s accounts this year. year.next. In a report released on Wednesday, the British bank highlighted that achieving the fiscal target next year will depend on uncertain net additional revenues, or spending cuts, of R$120 billion.
“If revenue-raising proposals submitted to Congress are not approved in a timely manner and/or are watered down, conditional revenues will have to be removed from the draft budget. In this case, expenditures will have to be reduced or at least temporarily frozen (which may impose a high political cost “Otherwise, the target for the primary outcome will have to be lowered (which imposes significant credibility costs),” says Roberto Siemski, Brazil economist at Barclays.
If the impossibility of meeting next year’s target becomes clear in the coming months – for example, due to a lack of additional revenue or government resistance to spending cuts – the BoE says maintaining the target would be better than changing it. In this case, the incentives expected by the new financial framework will take effect over time, with lower costs that may affect the country’s credibility.
“However, it may be too much to ask of Brasilia, especially given the local elections in October 2024. However, changing the original targets in the first year of the new fiscal framework to prevent any stimulus (however gradual) could be achieved through economic reforms.” The report says: “These factors are considered opportunistic and harm the credibility of the new institutional arrangement, which is still in its infancy.”
