OECD urges Brazil to make fiscal reforms in the face of rising prices

RIO DE JANEIRO, BRAZIL – The OECD projects for Brazil a growth of 5% in its economic activity this year and 1.4% in 2022, but recommends its authorities to undertake fiscal reforms to address the “significant increase” in inflation in recent months.

This is stated in the section dedicated to Brazil by the Organization for Economic Cooperation and Development (OECD) in its economic outlook report released on Wednesday, which estimates that there will be a global growth of 5.6% this year.

Brazil, says the report, has channeled the economic recovery after the crisis generated in 2020 by the coronavirus pandemic, thanks to the vaccination campaign and the increase in private consumption and investments.

However, “supply chain bottlenecks, lower purchasing power, higher interest rates, and political uncertainty have slowed the pace of recovery,” the report adds.

In addition, it notes, “the labor market is recovering with some delay, and unemployment remains above pre-pandemic levels.”

The OECD estimates that Brazil will close this year with an inflation rate of 7.8%, although it forecasts that inflationary pressures will ease next year to 5.1%.

These pressures, the report recalls, have forced the Central Bank to raise interest rates, a monetary policy that it plans to maintain next year “to curb inflation dynamics”.

It also recalls that, as in the rest of the world, Brazil is suffering the effects of increases in raw material prices and global problems in the supply chain, which has increased transport cost prices.

“Political uncertainty and increased fiscal risk also weigh on the exchange rate and raise inflation” generated by external effects, says the OECD.

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