How is the GDP that lives on the street, picks up garbage and asks for money in traffic – 01/06/2023 – Vinicius Torres Freire

Anyone who walks through the wealthy and well-off neighborhoods of São Paulo may have noticed that the number of people left on the streets, camped on sidewalks, picking up what to eat from the garbage and children asking for money at traffic lights has decreased. It’s still awful, of course. Back in 2014, there was no such extreme of this example of Brazilian cruelty.

But the size of the disgrace seems to have diminished. It is anecdotal evidence, as economists say, in fact a “coxinha” indicator of the visibility of extreme poverty.

Statistics show that poverty was lower in 2022, thanks to the increase in the number of people with some work and the value of social benefits. It should drop more in this 2023, with Bolsa Família being bigger and reaching more people, for example. But the performance of work should make a smaller contribution to the reduction of this hardness.

At least, that’s what it seems, from the perspective of this June, perhaps blurred, as the economic projection errors are much bigger than usual.

The GDP and employment numbers that came out this week give more evidence of a slowdown in the economy, particularly in sectors and aspects that have more direct or immediate impact on the streets, on ordinary life.

The number of employed people, with some kind of paid work, has been stagnant in this 2023. GDP growth in the first quarter was large and surprising, certainly. However, looking at the data from the inside, one can see less animation, as in the case of what is called in the jargon “domestic demand”.

These are private consumption (by families), government consumption and investment in new production facilities, new homes, machinery, equipment, software. Domestic demand moved backwards in the first quarter, as investment dropped and household consumption grew little.

Consumption may even continue to grow by a tico, thanks also to social benefits. As for investment, the situation looks uglier, with high interest rates, indebted companies and even macroeconomic uncertainties.

The growth, from a demand perspective (consumption in general), came from exports and agricultural stocks, for the most part, to be exported or consumed here later. From a production perspective, the bulk of the growth came from agriculture.

In short, it does not look like a picture that suggests an increase in employment ahead. The basic interest rate, the Selic, which should stay the same until August or September, will weigh until 2024. A relief comes from the onslaught of the money market, where government financing rates are defined —interest rates have dropped significantly . Even the expectation of implicit inflation in bonds dropped considerably throughout May.

The Central Bank is starting to look backward, even though inflation is actually falling very slowly, especially in services, pressured by wages.

If the Lula government puts an end to this talk of raising the target for the IPCA, inflation expectations will drop further and, thus, interest rates. It is one of the ways to make 2024 better.

Higher GDP and other tax decisions should favor government revenue and make it a little less difficult for the Treasury to meet its target public account balance (lower deficit). The risk is still high, of course, and part of the Lula government is still dedicated to doing economic nonsense. But a candle light also appeared in the case of the deficit.

In any case, at the end of 2022, people in the markets were forecasting a rise of 0.8% in GDP for 2023. Disasters aside, growth should be close to 2.5%. A brutal difference. The task now is to deal with profound changes, forget demagogues (like “More Cars”) and help save 2024. There is still time.

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