Brazil recorded its highest inflation in six years in 2021

Brazil registered in 2021 a inflation 10.06%, the highest since 2015 and much higher than the previous year (4.52%), a figure that may further darken the outlook for the president Jair Bolsonaro nine months before the presidential elections.

“It is the highest accumulated rate in a year since 2015, when it was 10.67%,” stated the official statistics institute IBGE in its newsletter this Tuesday.

The price increase exceeded market projections, located at 9.99% in the latest Focus survey by the Central Bank of Brazil (BCB).

The inflation in December (0.73%) it was slightly lower than the 0.95% registered in November.

The result for 2021 is well above the target of 3.75%, and its ceiling of 5.25%, established by the BCB, something that has not happened since 2015.

According to the IBGE, the data was mainly influenced by transport, which had the greatest variation (21.03%) and the highest incidence (4.19 percentage points) in the year, followed by the item of housing (13.05%) and food and drinks (7.94%).

Together, the three sectors accounted for about 79% of 2021 inflation.

“Transportation was affected mainly by fuels,” explained the person in charge of preparing the IBGE inflation index, Pedro Kislanov.

“Churning atmosphere”

Inflation, a global problem derived in part from the economic effects of the coronavirus pandemic, erodes the income of families, especially the most vulnerable, who spend the bulk of their money on food in Brazil. The price of meat, for example, rose 8.45% in one year.

Images of people rummaging through garbage in search of food proliferated in recent months in the South American giant.

According to Alex Agostini, from the Austin Rating consultancy, several factors also explain this double-digit annual inflation, a situation that Brazil experienced in the 1980s and 1990s.

“There is a supply restriction of various components in the world. In addition, here in Brazil there is a question of fiscal risk and a disturbed political environment that had a great impact on the devaluation of the real, which greatly affected prices. radar the omicron variant, which generates a bad expectation for 2022, “he explained to AFP.

The market projection for 2022 is for inflation of 5.03 percent.

To try to stop the incessant price advance, the Central Bank of Brazil imposed in the last seven meetings of the Monetary Policy Committee (Copom) significant increases in the Selic benchmark interest rate.

In December, it applied a rise of 1.5 percentage points, to 9.25%, the maximum since 2017, and warned that it expects an equal increase in the next meeting, in February.

For now, the strategy did not work, and economists expect inflation to remain at high levels this year, in which the president Jair Bolsonaro will try to be reelected in October, in an election in which the polls today give the victory to the former leftist president Luiz Inácio Lula da Silva, who has not yet confirmed his candidacy.

“The rise in prices, which reduces the purchasing potential of families, and the rise in the interest rate to combat it, which is slowing down those sectors that were still breathing, such as construction or vehicles, will greatly impact the growth of the economy in 2022, “explained Agostini.

Growth forecasts for 2022 are not very optimistic, at 0.28% according to the latest Focus survey, compared to the 2.5% expected a year ago.

At third quarter, the Brazilian economy entered a recession, contracting (-0.1%), after a fall (-0.4%) between April and June.