Since President Michel Temer took power, Brazil has slowly climbed its way out of recession. However, he will not stand for election in October 2018 [PPIO]
Brazilian markets are cheering the International Monetary Fund’s revised growth forecast for their country.
In its April publication of the World Economic Outlook, the IMF said that it had revised its growth projects for Brazil among a slew of other emerging economies.
It now says that Brazil’s GDP growth in 2018 will reach 2.3 per cent, higher than most domestic forecasts and clearly a boon for a government that has been besieged by corruption charges amid promises of an economic turnaround.
The previous forecast in October was 1.9 per cent growth. In 2017, GDP growth was at 1.0 per cent.
One of the pivotal instruments in ensuring this turnaround has been a curbing of runaway two-digit inflation, which the IMF says is now “around historical lows in Brazil and Russia, where demand has been recovering from the deep contractions of 2015–16 …”
The IMF report also said that “in emerging market economies, financial conditions since August have generally remained supportive of a pickup in economic activity. Monetary policy was eased further in Brazil and Russia”.
The Brazilian Central Bank (Banco Central do Brasil) said this quarter that economic activity has surged in the country, reaching a pace that was both unexpected and the fastest in four years.
The Bank’s economic activity index jumped 1.41 per cent on a seasonally adjusted basis, its data showed. This is welcome news to markets which in January received news that the government was abandoning efforts to pass a major reform of the social security system which creditors have cited as necessary to fiscal reform.
Coupled with a surge in consumer spending on the back of lowered interests rates, an inflation rate that has been brought under control within Central Bank limits, and the 1.04 increase in economic activity between 2016 and 2017, Brazil appears to have well emerged out of its three-year recession.
However, continued corruption scandals and the political uncertainty that comes with the upcoming national elections in October could derail market reform efforts which have paid off for the Brazilian economy, the IMF warned.
The BRICS Post with inputs from Agencies
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