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Gov’t raises Brazil’s forecast for 2019 GDP growth

The estimate went from 0.81% to 0.85%

Published in 10/09/2019 - 15:46

By Kelly Oliveira Brasília

Brazil’s government slightly increased its forecast for the growth in the country’s gross domestic product (GDP). The estimate was revised from 0.81 to 0.85 percent this year. The figure was unveiled today (Sep 10) by the Ministry of the Economy in a report dubbed Macro Fiscal.

“Activity is expected to start being restored in September this year, as a response to the initial effects of the slash in interest, the increase in confidence, and the beginning of the period for FGTS [Guarantee Fund for Length of Service] withdrawals,” the report says.

The government authorized the withdrawal of up to $122,65 per FGTS account. A schedule was devised for withdrawals this year. The first ones may take place this year and cover those born in the first three months of the year. In 2020, the withdrawals will take place on account holders’ birthday. Before this measure, the fund could only be withdrawn after the worker in question was fired for cause.

Inflation

The estimated inflation, as gauged by the National Broad Consumer Price Index (IPCA) was raised from 3.8 to 3.6 percent in 2019.

The downgrade, the report says, was caused by the “decompression” of food prices. “After the impact of price hikes in the first quarter, a partial reversion was seen in the second quarter, with the trend preserved for the months of July and August.” The document also mentions “a relative stability in inflation for services.”

The forecast for 2019 is lower than the center of the inflation target, set by the National Monetary Council at 4.25 percent in 2019, with a tolerance interval of 1.5 percentage points up or down.

Challenges facing the economy

Adolfo Sachsida, secretary for Economic Policy of the Economy Ministry, named three challenges to be overcome before economic growth is restored in the long term: an important one, an urgent one, and lastly a circumstantial one. He described as important the recovery of Brazil’s economic productivity—which slid to 2.11% from 2010 to 2017. “If we don’t bring back the Brazilian economic productivity, there will be no sustainable growth in the long run,” he argued.

As an urgent challenge, Sachside cited the fiscal landscape. “It is crucial that we address Brazil’s fiscal issue. The new pension system was a vital stride, but a wide agenda is still necessary to tackle this challenge,” he said. Finally, the third challenge is the international scenario, assailed by a “generalized slowdown” in the economy.

Translation: Fabrício Ferreira Edition: Valéria Aguiar / Nira Foster

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