IMF raises Brazil’s estimated growth to 2.3% in 2018

The forecasts come as part of the World Economic Outlook

Published in 17/04/2018 - 15:13 By Paola de Orte, correspondent - Washington

The International Monetary Fund (IMF) raised the growth estimated for Brazil to 2.3% in 2018, and to 2.5% in 2019. The forecasts are part of the World Economic Outlook, published today (Apr. 17), and represent 0.4 percentage points above those published in January. The hike was driven by the increase in investment and private consumption in the country. For 2017, however, the IMF lowered the country’s growth to 1%, compared to the previous 1.1%.

Also registered are the historically low levels of Brazilian inflation and the slackening of the country’s monetary policy, which favored the recovery of economic activity. The inflation is likely to stand at three to four percent in 2018, the IMF believes, but may rise on the medium run as commodity prices increase again. Nonetheless, rates are expected to remain well below those from last decade.

The improvements in monetary policy are reported to have lowered inflationary expectations in both Brazil and India. On the other hand, in countries like Argentina and Turkey, the inflation is believed to remain above the target set by their central banks.

According to the IMF, global trade showed a significant recovery in 2017, after performing poorly for two years, with a real growth of 4.9%. The resumption was more conspicuous in emerging markets and developing economies, as a result of more investment in commodity-exporting economies and the recovery in investment in advanced economies and household demand overall.

In Brazil, this reflects on imports, after the country faced a reduction in commodity prices in 2015 to 2016. The IMF believes deep recessions in these years observed in Russia and Brazil stemmed from this fall and also “idiosyncratic problems.”

Reducing tariff and non-tariff barriers, the IMF argued, will help bolster efficiency and stimulate growth in Brazil’s productivity. The document further remarks that making government infrastructure concessions more attractive can help expand private investments and address infrastructure issues in the country. Also highlighted was the role of income transfer initiatives in Brazil and Mexico for redressing inequality.

In the outlook, the IMF describes overhauls like the pension reform in Brazil as priorities to ensure that public spending complies with the spending cap and stays in harmony with long-term fiscal sustainability, adding, however, that political uncertainties arising from elections may hinder the implementation of such a reform. Weak governance and large-scale corruption, the study adds, can also undermine confidence and lower popular support for the changes, which is detrimental to economic activity.

Translation: Fabrício Ferreira -  Edition: Carolina Pimentel/Vanira Foster

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