Growth with Fiscal Discipline Against a Backdrop of a Weak Global Economy

BRAZIL ECONOMICS - Report 16 Nov 2022 by Paula Magalhães, Diego Brandao, Cristina Pinotti and Affonso Pastore

Just like in his first term, starting in 2003, the results of Lula’s term beginning in 2023 will depend on two conditions: a) the behavior of the international economy; and b) overcoming the challenge imposed by the fiscal situation. The main differences are that in 2003, the international economy contributed positively to the growth of Brazil’s GDP and to the decline of inflation, and the fiscal problem was much less serious, while in 2023, global growth will be decelerating markedly and the fiscal problem will be much greater. In the final analysis, the Brazilian economy is plagued by a conflict between expansionary fiscal policy and restrictive monetary policy, which did not exist in 2003. Here we compare these two situations and analyze the future perspectives.

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