Brasília – Brazil’s Gross Domestic Product (GDP) should see weaker growth in 2018 and 2019, according to a forecast update brought by the report World Economic Outlook of the International Monetary Fund (IMF), released this Tuesday (09).
The estimate for the GDP growth came in at 1.4% for this year, down 0.4 percentage point over July’s forecast. For 2019, the GDP growth forecast was revised down 0.1 percentage point to 2.4%.
According to the IMF, the Brazilian economy will grow this year and the next carried by the recovery of private demand. In the report, the Fund mentions the impact of the truckers’ strike (picture above), at the end of May, in the GDP forecast for this year being revised down in comparison to April’s estimate.
“The projected growth for 2018 is weaker than in April’s report in 0.9 percentage point due to interruptions caused by the truckers’ strike throughout the country and tightening external financial conditions, which are a source of risk for the outlook,” says the report.
For the IMF, inflation should reach 3.7% this year and 4.2% in 2019. The Fund expects food prices inflation to come in stronger, after a decline caused by an extraordinary crop in 2017.
The Fund expects the monetary policy to remain accommodative, with the unemployment rate to remain high and the inflation rate to increasingly grow towards the target, which should still be pursued by the Brazilian Central Bank (BC). The IMF’s forecast for the unemployment rate is of 11.8% in 2018 and of 10.7% in 2019.
In the report, the IMF added that fiscal consolidation is a priority for Brazil. “The reform of the pension system is crucial to ensure sustainability and justice, since pension costs are high and rising and retirement pensions are improperly generous to some sectors of the population,” states the document.
The IMF also supports an increase in budget flexibility. “It will also be necessary to keep controlling the government’s wage bill, integrating the tax systems of the central and states governments, and improving the finance of state and municipal governments, while protecting efficient social programs,” states the Fund.
Translated by Sérgio Kakitani
