IMF lowers growth forecast for Brazil

Brazil going against global trend, says IMF

Published in 22/01/2014 - 17:23 By Wellton Máximo reports from Agência Brasil - Brasília

The World Economic Outlook update released Tuesday (Jan. 21) by the International Monetary Fund (IMF) has announced a lower growth forecast for Brazil's economy this year. For 2015, projections dropped from 3.2% to 2.8%.

The IMF said Brazil's economic situation contrasts with the global trend, which points to an economy growth of 3.7% this year – up from the previous 3.6% forecast – and a continued 3.9% in 2015.

Credit squeeze (leading to lower domestic demands), economy bottlenecks, and political uncertainty – which translates into reduced investments – were cited as key contributing factors weighing into the downward revision, not only in Brazil but in emerging countries generally.

As the quantitative easing measures begin to taper off, the report says, countries with severe foreign liabilities such as Brazil will be exposed to even greater risk in 2014: “Economies with domestic weaknesses and partly related external current account deficits appear particularly exposed. Exchange rates should be allowed to depreciate [which will increase the dollar value* against the real] in response to deteriorating external funding conditions.”

The document goes on to recommend that emerging countries tighten fiscal discipline and strengthen regulatory policies in order to drive infrastructure improvements. Only such efforts, IMF says, could secure trust from foreign investors and avoid sharper capital outflows from these countries.

The global economy pickup was primarily put down to the recovery of developed countries, where domestic markets have started to rebound following years of crisis. However, the IMF warned the US and European Union against cutting down too quickly on stimuli provided in the past few years.

The report concluded, “Stronger growth is needed to complete balance sheet repair after the crisis and to lower related legacy risks. In the euro area, the European Central Bank (ECB) will need to consider additional measures toward this end.”

Translated by Mayra Borges

Fonte: IMF lowers growth forecast for Brazil

Edition: Nádia Franco / Lícia Marques

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