Brazil's economy to face major hurdles in 2023, say experts

BRASILIA, Dec. 24 (Xinhua) -- Brazil's economy will face major challenges in 2023, including an uncertain global landscape, raging inflation and staggering economic recovery, while President-elect Luiz Inacio Lula da Silva's administration grapples with its first year in office, experts have said.

Lula's new economic team, led by Fernando Haddad, the incoming finance minister, must strive to strike a balance between strengthening social programs as promised, and reining in spending to prevent an increase in public debt.

According to Roberto de Goes Ellery Junior, professor of Economics at the University of Brasilia, economic activity in 2022 benefited from stimulus policies linked to the re-election effort of outgoing President Jair Bolsonaro, who lost to Lula in election in October.

"Looking at the numbers for 2022, there is an interesting outcome: good growth in keeping with Brazilian standards, and high inflation but lower than that of other countries, such as the United States and Europe, for example," he said.

"My assessment is that it was an apparently good year but that it could have a high cost later, as has happened before in Brazilian history. I view the fiscal outcome of higher tax revenue with concern, because it is largely due to inflation," said the professor.

"In 2022 we had positive numbers due to short-term policies, and in 2023 we must foot the bill for those policies while the new government tries to fulfill campaign promises," he noted.

The impact of increased spending could lead to problems "because nobody likes high interest rates, or inflation, or the devaluation of the exchange rate," he noted.

"My reading is that 2023 is going to be a tough year, both from an economic and political perspective. The government is going to need a lot of ability to overcome difficulties and deliver good results, and attend to the needs of society," he said.

Luis Antonio Paulino, professor of Economics at the Paulista State University, expects Brazil's growth rate, which was quite positive in 2022, to slow next year, dragged down by global uncertainty.

"In 2022, Brazil's growth rate should be 2.8 percent, above the average for developed countries, but below the global average and for emerging countries," he said.

"What sustained economic growth in 2022, despite the problems, was the recovery of post-pandemic activity, especially in the service sector, as restrictions imposed by the COVID-19 pandemic were eased," he added.

The prospects for 2023 point to 1 percent growth in Brazil's economy, he said.

"In the manufacturing sector, industry's rebuilding of stocks is also helping to sustain economic activity in the sector. But these positive factors are unlikely to continue in 2023, making all forecasts for 2023 worse than those for 2022," he said.

Sergio Rosa, an expert in Public Policy and Federal Government Management, pointed out that Brazil's economy has undergone notable changes since 2016 as a result of neoliberal policies.

"It led to a disorganization of economic production, with an evident lack of coordination of activity, and with direct repercussions on the results, especially those derived from social policies of basic income for the neediest," he stressed.

Those negative factors, said the economist, were later amplified by the COVID-19 pandemic and the crisis in Ukraine.

"Brazil's economic performance in the past six years has been one of restructuring, accompanied by a disorganization of production and the credit system, mainly due to new banking technologies," he said.

However, the return to power of the Workers' Party raises the chances of having policies geared towards greater productive coordination and integration, he said.

Lula's government, he added, should result in "strong enforcement of the law, associated with an increase in the capacity to coordinate production through social policies and to integrate advantageously into the new matrix of global value-added chains."