Ipea advocates reducing the Selic to 7% by the end of the year
This article was translated by an automatic translation system, and was therefore not reviewed by people.
The director of the Macroeconomic Research Institute of Applied Economic Research (IPEA), John Sicsú said this Wednesday (4) that the government may increase social spending and investment increasing the nominal deficit. He said that the deficit, which last year was 1.5% of Gross Domestic Product (GDP) may be extended provided that does not exceed 3% of GDP. "A deficit below 3% of GDP is quite acceptable," said Sicsú that at no time, has explicitly called for reducing the primary surplus target, despite being argued for the expansion of spending, even in an environment where he provides a drop in revenues of $ 25 billion. "I meet the rule of the primary surplus," he said, in general. Primary surplus is the economy that the government is to pay the interest on public debt. The Ipea is a federal public foundation linked to the Strategic Affairs Secretariat of the Presidency.
Sicsú today presented a technical note in which advocates a gradual reduction of the basic interest rate (Selic) from the current 12.75% per annum up to 7% per year in December. He says the measure would lead to a reduction of $ 30 billion in public spending with interest. "It is now important to tax administration responsible. We can not cut social spending and investment and we should cut spending on interest, which have no impact on the generation of employment, income and economic growth," he said.
He noted that public investment, of course, are slower because they require bureaucratic issues and engineering and social spending have an impact on the economy as quickly become faster in household consumption. That is, the strategy advocated by economist is that, from a reduction of interest, the government is able not only to avoid drastic cuts in expenditure according to the fall of $ 25 billion provided for the revenue, but also extend these expenditure, which would result in his view, a positive impact on private demand and therefore growth in the country and generate employment.
When asked about the impact that this drastic reduction in interest rates would have on inflation, Sicsú dismissed the case, explaining that there is no direct relationship between interest rates and inflation, but the relationship is between economic activity and inflation. He said he believed that the interest alone would now be to stimulate investment and the resumption of growth and therefore would not impact on inflation.
He cited as examples the cases of countries like the United States and Japan where, despite being practically zero interest, economic activity is not responding. According to the economist, this time of crisis, which progresses rapidly, the basic rate is an important variable of fiscal policy, to allow the government made a policy of spending to stimulate growth, without which the situation of fiscal solvency is impaired .
"You can face the crisis so convincingly, keeping the budget and responsibility accounting, doing something that the world is doing: cutting interest rates," said Sicsú. "The ideal policy, from a supervisor, to face the crisis is one that combines reduced Selic with expansion of social spending and investment," he added.
Sicsú second, the concern now is not inflation, and unemployment is at its assessment, if this policy is successful and to stimulate demand and economic growth, and possibly generate more inflation ahead, the government could tackle the inflation problem since the issue of unemployment will be solved.
Source: State Agency
This article was translated by an automatic translation system, and was therefore not reviewed by people.
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