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IMF predicts brighter Brazil economy in 2018-2019

According to the International Monetary Fund's report released Tuesday, consumer demand and investment will help Brazil post a performance that will outpace the rest of the region this year.

Tuesday 17 April, 2018
Employees of Frysk Industrial, a subsidiary of the Brazilian-American group Aurantiaca, work at the coconut industrial facility near Conde, a city about 200 km north of Salvador.
Employees of Frysk Industrial, a subsidiary of the Brazilian-American group Aurantiaca, work at the coconut industrial facility near Conde, a city about 200 km north of Salvador. Foto:AFP

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Brazil's economy, by far the biggest in Latin America, faces a brighter future after several dismal years, with 2.3 percent growth this year and 2.5 percent in 2019, the International Monetary Fund (IMF) is predicting.

According to the IMF's report released Tuesday, consumer demand and investment will help Brazil post  a performance outpacing the rest of the region this year.

The GDP growth forecasts are both 0.4 percentage points higher than in the IMF's January forecast.

"Following a deep recession in 2015-16, Brazil's economy returned to growth in 2017 (1.0 percent) and is expected to improve to 2.3 percent in 2018 and 2.5 percent in 2019, buoyed by stronger private consumption and investment," the IMF said.

"Medium-term growth is set to moderate to 2.2 percent, weighed down by population aging and stagnant productivity," it said.

Latin America as a whole will hit only two percent gross domestic product growth in 2018, but outpace Brazil in 2019 with 2.8 percent growth, the IMF said.

Worldwide economic expansion is set for 3.9 percent both this year and next, the IMF said.

For Brazil, one of the biggest risks will come from politics, which are heating up six months ahead of presidential and congressional elections in October.

"Political uncertainty also gives rise to reform implementation risks or the possibility of reoriented policy agendas, including in the context of upcoming elections or their immediate aftermath," the IMF said, pointing to Brazil but also Colombia and Mexico.

And despite the better outlook, unemployment in Brazil will remain stubbornly high, the IMF said, at 11.6 percent in 2018 and 10.5 percent in 2019. It reached 12.8 percent last year.

The IMF called for further austerity reforms to Brazil's bloated budget, singling out the politically sensitive area of pension reform "to ensure that spending is consistent with the constitutional fiscal rule and to guarantee long-term fiscal sustainability."

- AFP

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