By William Jones, Contributing Reporter
RIO DE JANEIRO, BRAZIL – According to a study by the International Monetary Fund (IMF), Brazil is expected to fall behind other emerging economies and end this year with a slower growth rate than the world average. The study, entitled “Economic Perspectives in the Americas, growing challenges,” concludes that the Brazilian GDP (Gross Domestic Product, total output of the country’s economy) expansion will be less than two percent this year.
This makes for heavy reading as Brazil is expected to be surpassed by the Latin American average GDP growth of 2.5 percent and the world average of 3.5 percent.
The IMF highlighted that Brazil’s uncharacteristically low rainfall this year has been a major drain on the economy. Low water levels at hydroelectric plants across the country have forced the government to use more expensive energy sources and brought back the specter of energy and water rationing.
“The electricity sector can absorb subsidies for some time but at the cost of lower investment and ultimately the capitalization of them. Therefore it will have consequences for the rest of the economy and to public finances,” the report read.
The IMF also warned that the government’s monetary policies, such as the implementation of some of the highest interest rates the country has ever seen, will not be able to take inflation to within the target range of below 6.5 percent because of limited production capacity, inflation and the impact of a weakening currency next to the U.S. Dollar.
The average GDP growth for emerging economies is 4.9 percent, which puts Brazil well behind of other so-called BRICs. The report shows that global growth has gained momentum in the second half of last year and should increase further this year, driven in part by the recovery of major economies like the United States.
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