Brazil fiscal and welfare spending demands will clash
Friday, December 3, 2021
Significance
The economy is at a crossroads: high unemployment and increasing poverty are generating pressures for greater income transfers, but the delicate fiscal position is generating concern about long-term fiscal sustainability. Rising inflation has generated temporary fiscal relief, but for the coming years fiscal indicators are expected to worsen.
Impacts
- Conflicting pressures between welfare spending and long-term fiscal equilibrium will worsen in coming months.
- The implementation of ‘populist’ policies for purely political purposes may prove unsustainable.
- Uncertainty about fiscal issues will contribute to deteriorating perceptions about the future of the economy.