The villains of inflation in 2020 and food prices pressed by the dollar are expected to hit Brazil’s pocket by 2021, especially from the second quarter. At this time of year, the grain crop is pouring into the market, which promises to break a new record. The relief in spending on food should not be small. According to the Broad Consumer Price Index (IPCA), two-thirds of the 12-month inflation accumulated this year was up to 4.3% in November.
However, this includes a new focus on the pressures expected for inflation in 2021. It should come from two groups that the epidemic has been going well this year: services and managed prices, the need for their adjustment being recognized by the government.
With social isolation, demand for services fell and prevented rising. In turn, managed prices, including transportation costs, fuels, health plans, and medicines, remained flat for most of the year. Electricity only returned strong this month, with an additional charge of R $ 6.243 per 100 kilowatts with a red flag.
“Food will not continue to rise in 2021,” predicts economist Heron Do Carmo, a senior professor at the FEA / USP and one of the leading experts on inflation. The increase in food prices this year was due to the maximum depreciation of the exchange rate and high demand in the domestic and foreign markets. “They brought together two things that never happened at the same time.” In his assessment, the perspective is that this expansion will not continue as the food is already at a very high level. In addition, the transfer rate begins to cool.
Nearly three percentage points, Heron points out, will be under pressure from other price groups, as the gap in food inflation will be much larger. Therefore, taking into account the information available so far, he expects IPCA 2021 to close at 3%. The central bank’s latest focus bulletin shows that the market expects 3.37% inflation for next year.
“The problem will be the path of inflation throughout 2021”, thinks the economist. With food prices beginning to rise in September, he predicts that accumulated inflation will reach its peak in 12 months and reach or surpass the target of 5.25% by 2021 in May, but it will fall.
Another inflation expert, LCA Consultants economist Fabio Romeo, agrees with Heron. “Food may lose a lot of strength in 2021.” However, it plans to salt IPCA for next year: a chance of 3.5% and above.
Romeo warns that this year’s inflationary controls – services and managed prices – will play in the opposite direction in 2021. “The economy will recover and services will be accelerated by managing prices. The characters are upside down. ”
The accumulated increase in total industrial output this year, about 25%, is another significant risk for inflation in 2021, according to Romeo. “This will be a place for relocation, with a huge spending pressure and growth in the economy. In 2021, retail expects industrial goods to grow by 3.4%, compared to 2.9% this year. Points out.
According to economist Fabio Silveira, a partner at Macrosector Consultants, inflation in 2021 is expected to weigh on this legacy of 2020 high costs of commodities. “Today consumer prices are below equilibrium prices because companies have to keep reforms to a minimum in order to survive.”
Replacing traditional spending from 2021 would, according to Silveira, raise consumer codes in the first half of 2021. As a result, the IPCA is expected to close at about 4.3% next year. This is half a point above the 2021 target 3.75% center.
Silvera adds another hub of the IPCA 2021 fuel price downturn, which is 10% to 12% higher than international market prices today. “There is no way to insure the price of diesel and petrol that will be artificially reduced by Petrobras,” he says.
According to Marcio Milan, economist at Tendensia Integrada, fuel prices and other regulated prices are at the center of concern for inflation in 2021. This year, regulated prices have risen 2.2%, with their expectation of 4.8% ahead of next year. That is, it doubles the positive rhythm.
In Milan, IPCA groups, where projected inflation is projected to rise to 3.4% for 2021, managed prices are expected to improve further by 2020 and almost half (1.23 points) per cent of next year’s inflation.
Among those managed, the economist highlights the pressure to come from petrol. “In the context of the recovery in the global economy, it is expected that oil prices will accelerate again and there will be a substantial shift to fuels in retail throughout 2021.”
The MP said the concern over inflation in 2021 includes the recovery of service and administrative prices. Sergio Vale, chief economist at Associates, agrees. But, in his opinion, the biggest medium-term risk factor for inflation is the country’s financial problem, unless any appropriate changes are approved. “There is the expectation of a broader reform, but if it fails, it will have to keep the exchange rate under pressure, and this will affect prices in rice and inflation.” MB Associates plans a 3.8% IPCA next year.