Market assesses that Haddad has lost strength since the beginning of his term, according to research

The Genial/Quaest survey that collects opinions from the financial market reveals a perception of weakening of the Minister of Finance, Fernando Haddadalong with the loss of credibility of fiscal policy.

The market’s positive assessment of Haddad’s work fell to 41%, compared to 50% in the previous survey, carried out in March. For 61%, the Minister of Finance has lost strength since the beginning of his term, and in March only 14% had this impression.

The survey was carried out over the last five days – between November 29th and December 3rd –, thus capturing the negative reaction of the financial market to the fiscal package announced on Wednesday last week. 105 interviews were carried out with managers, economists, analysts and operators (traders) of investment funds based in São Paulo and Rio de Janeiro.

The research confirms the erosion of fiscal policy vis-à-vis the market. The assessment of 58% of those interviewed is that the fiscal framework, which establishes targets for reducing the deficit in public accounts and limits on spending, has lost all credibility. The remaining portion, 42%, understands that the rule has little credibility left.

According to Genial/Quaest, in the wake of public expenditure containment measures considered unsatisfactory by 58%, more than a third of the market (37%) understands that the framework is only sustainable until next year. The assessment, expressed by 96% of survey participants, that economic policy is moving in the wrong direction is practically widespread – an increase compared to the portion that had this perception in March: 71%.

As a result, despite the above activity indicators that surprised economists this year, the expectation of a worsening of the economy in the next 12 months rose from 32% to 88%.

The expansion of the income tax exemption range to R$5,000, proposed together with the package, is seen by 85% as a measure that tends to harm the economy, and half of those interviewed (50%) see it as very likely approval in Congress. Despite this, the assessment that, in general, the government’s capacity to approve its agenda in the Legislature increased from 23% to 39%.

After the release of the cost containment package, 67% of funds say they will increase their position abroad. With 66% of the market predicting an acceleration in the rise in interest rates to 0.75 percentage points at the Monetary Policy Committee (Copom) meeting next week, a third (34%) are betting that the monetary tightening cycle ends with Selic above 14%.

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