IMF estimates Brazilian economic growth to be less than halve in Lula’s first year

The Fund’s new estimates project very moderate annual growth of 1.2% for Brazil’s economy, in contrast to the 3.1% seen in 2022.

The country is out of line with the average growth rate for emerging economies.

Brazil’s economic turnaround has greatly impacted growth expectations for the medium and long term.

The new growth projections reported by the International Monetary Fund (IMF) suggest that the country will grow by only 1.2% in 2023.

The growth rate will more than halve compared to the 3.1% observed during 2022.

The pace of growth in 2023 would again resemble the pace recorded between 2017 and 2019, further delaying the recovery of the level of activity lost during the recession of the last Dilma Rousseff government.

Likewise, the Monetary Fund also cut growth estimates for Brazil in the coming years. Economic activity would grow to 1.5% in 2024, compared to the 1.9% suggested by last year’s December estimate.

With these estimates, Brazil’s economic dynamism moves away from the performance of typically emerging economies (which tend to grow faster than the world average) to approach developed economies with the slowest rate of expansion globally.

The IMF estimates that developing economies will have an average growth of 4% by 2023, more than three times what is expected for Brazil, and the divergence deepens even more from 2024 onwards.

South America’s largest economy would have the same annual growth in 2023 as the advanced economies, similar to Canada (1.5%), the United States (1.4%), Spain (1.1%), and Japan (1.8%).

This is a fatal outcome for development since growing at the same rate as developed countries mean, burying any possibility of convergence toward those standards.

Average growth for middle-income emerging countries will amount to 4% by 2023 and 4.1% by 2024, while low-income emerging countries will grow by 4.9% in 2023 and up to 5.6% in 2024.

Brazil’s outlook is comfortably pessimistic and does not fit either of these two scenarios. The Brazilian economy, along with Chile and Argentina, boasts one of the worst growth prospects for the region.

President Lula da Silva’s first measures strongly conditioned the economy’s growth.

The risk of abandoning fiscal discipline, the cancellation of all planned privatizations, the return to the closure of the Mercosur economy, and possible reforms to the labor market and the pension system are factors that limit the expansion of the supply and stock of capital.

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