Former BC president criticizes the government’s excessive optimism in the economy

Economist Affonso Celso Pastore, former president of the Central Bank, criticized the “excessive optimism” of the economic team of President Luiz Inácio Lula da Silva’s government regarding GDP growth and the reduction of interest rates.

“If the government ran primary surpluses, if it met the primary result target, you would have a better result than what we are seeing. The result I am seeing, from what he (Minister of Finance, Fernando Haddad) revealed in his revenue projections, is that he is overly optimistic that only he, and no one else, has”, said Pastore in an interview with Folha de S. Paulopublished this Sunday night (10)

Pastore also attributed GDP growth to high government spending, and said that some measures announced by the economic team should lead the private sector to retract and lead to high interest rates. “As fiscal policy became expansionary and the equilibrium real interest rate, called neutral interest, grew, it is not possible to be optimistic regarding private investment. It has to shrink”, explained the economist.

The economist also pointed out a “conflict between fiscal policy and monetary policy” created by the government. “Monetary policy to bring inflation down is placed in restrictive mode. Fiscal policy is placed in expansionary mode. Let’s see how this goes from now on”, he explains.

Another critical point pointed out by the former president of the BC is the government’s attempt to try to eliminate the public deficit. “I looked at the data, I looked at the revenue increase projects and I looked at the spending increase commitment. And I see that you can’t do both. How are they going to get out of this problem? It’s their issue, but I don’t see how they’re going to do that,” he said.