World Bank cuts Brazil’s estimated GDP growth in 2018 to 1.2%

The World Bank halved its prediction for the growth of the Brazilian economy this year. In its semiannual, regional report entitled On Uncertainties and Black Swans: How to Manage Risks in Latin America and the Caribbean, released Friday (Oct. 5), the prediction for the expansion in Brazil’s GDP slipped from 2.4 to 1.2 percent.

The estimate for 2019 was also reduced—from 2.5 to 2.2 percent.

In the report, the Central Bank notes that the Brazilian Central Bank reduced its forecast for economic growth late in June to 1.6 percent from a previous 2.6 percent, after the strike held by truck drivers brought a number of sectors of the economy to a halt.

“The persistence of significant and apparently unmanageable fiscal deficits, the lack of a major reform in the pension system, and the increasing political uncertainty regarding the October elections, coupled with the recent apprehension of international capital markets, have brought into question even [the World Bank’s] moderate growth at 1.2 percent for 2018,” the report reads.

Latin America

The estimate for Brazil, which accounts for over one third of the region’s GDP, was one of the reasons that brought about the reduction in the estimated growth of Latin America and the Caribbean. The prediction dropped to 0.6 percent in 2018 and 1.6 percent in 2019. The previous estimates were 1.8 percent this year and 2.3 percent in 2019.

In addition to the slowdown in Brazil, the estimate for the region was affected by the market instability caused in April in Argentina by the continued deterioration of the situation in Venezuela, and an aggravation of the international landscape. If Venezuela is not considered, the GDP in the region would be expected to grow 1.6 percent this year and 2.1 the nex.