Budget 2021: the government indicates spending restrictions and forecasts a GDP increase of 3.2% | economy

The expectation of a 3.2% increase in the Gross Domestic Product (GDP) it is in the budget proposal for next year, sent by the government to Congress on Monday (31).

• READ MORE: With lower inflation, the government reduces the proposed minimum wage from R $ 1,079 to R $ 1,067 in 2021

The estimate presented in the budget is close to that published by the government in April and July. For the financial market, the economy will grow 3.5% next year.

The budget proposal also reveals a increased restrictions on so-called “discretionary” spending, that is, they are not required.

According to the budget proposal:

• the government will have R $ 92.052 billion available to spend freely next year, which does not include transfers to state companies (controlled by the government);

To this amount, another R $ 16.344 billion of expenses proposed by Congress through the so-called tax amendments should be added next year. The total discretionary expense, therefore, can reach R $ 108,396 billion.

After obtaining authorization from the National Congress to make extraordinary expenses this year to face the new coronavirus pandemic and its effects on the economy, the government will have to return to the maximum spending limits in 2021.

The cap is a rule that limits the increase in public spending to the inflation of the previous year.

Given that mandatory spending, which represents around 94% of total Union spending, will continue to rise above inflation in 2021, there will be fewer resources for spending that the government can freely allocate.

According to a study by the economist and researcher Manoel Pires, former secretary of Economic Policy of the Ministry of Finance, when analyzing “all the available indicators”, the impression is that if discretionary spending is below R $ 120 billion, it is “very likely that the federal government is already very close to applying a ‘closure’ [paralisia] in practice”.

According to a previous analysis by the Independent Tax Institution (IFI), the compression of free public spending threatens to compromise part of public services in 2021.

“If the government tightens discretion, it may be able to comply [o teto de gastos], but it will be operating on the ‘razor’s edge’, “said IFI executive director Felipe Salto recently, who assessed that” there is a risk of ‘closure’ [paralisação da máquina pública], without forcing the bar and being honest ”.

Among the non-mandatory expenses that may be affected They are:

• public investments, including infrastructure and in universities and federal institutes;
• agrarian defense actions;
• scholarships, research and for athletes;
• issuance of passports;
• Popular Pharmacy;
• inspections of slave labor and the environment;
• acquisition and distribution of food for family farming;
• Government administrative expenses (water, electricity, outsourced services).