São Paulo – This Wednesday (23rd), the International Monetary Fund has issued a report on Brazil’s economy, in which it forecasts a 3.5% growth rate for this year, as against a prior forecast of 4.25%. “Over the medium term, Brazil is projected to achieve potential growth of
about 3.5% (a downward revision of staff’s and market estimates). Even this lower potential growth will require scaled-up investment (including infrastructure) and an associated improvement in productivity growth. Absent comprehensive and decisive reform efforts to boost investment and productivity, Brazil’s potential growth would revert to its long-term historical average of about 3%,” according to the report.
The organization also advises the country to increase public and private domestic savings, in order to reduce reliance on foreign capital and curb the current account deficit. The IMF expresses concern over the fiscal policy, loss of competitiveness, inflationary pressures, and other issues, and recommends ending the stimulus measures adopted shortly after the world crisis.
But the Fund recognizes Brazil’s infrastructural efforts, as well as infrastructure and energy concessions, which should attract US$ 150 billion over a five-year period. According to the report, said concessions will relieve bottlenecks that hinder competitiveness, though the measures are recent and insufficient. The IMF advises on reducing labour costs, reviewing the minimum wage adjustment mechanism, implementing reforms toward a more flexible labour market, and reforming the social security system.
*Translated by Gabriel Pomerancblum
