IMF Reduces Forecast for Brazil GDP Growth in 2017

By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – On Monday January 16th, the International Monetary Fund (IMF) announced that it had reduced its forecast of Brazilian GDP growth from 1.5 percent to 0.2 percent in 2017.

The estimate is more pessimistic than that of financial institutions, which projected expansion of 0.5 percent, according to the Focus Bulletin, a weekly survey of market analysts released by the Central Bank.

Brazil’s Finance Minister Henrique Meirelles responded that the IMF tends to be more conservative than the market in estimates of economic growth.

In an interview with reporters at the World Economic Forum, he admitted that the government will revise official estimates for the expansion of gross domestic product (GDP) this year but did not indicate how much.

“The IMF tends to be more conservative. The market in Brazil is growing somewhat higher, 0.5 percent, but certainly the important thing is the economic recovery trajectory that starts at a very low level,” Meirelles said in the interview.

Angela Bouzanis, Senior Economist at FocusEconomics told The Rio Times, “The IMF’s downward revision of its growth forecast was not a surprise, given the country’s poor prospects for next year and the previously high GDP projection.”

Adding, “The Fund now expects the economy to barely grow and is even more pessimistic than our analysts, who see a 0.6 percent expansion in 2017. The downgrade is due to weaker than expected data for 2016 and shaky fundamentals. In particular, rising unemployment, a fiscal adjustment and the poor business climate are behind the long road to recovery.”

Officially, the Secretariat of Economic Policy of the Ministry of Finance still projects a one percent expansion to GDP in 2017 in the comparison that considers the whole year, not just quarter by quarter. In the latest Inflation Report, released at the end of December, the Central Bank revised the economic growth forecast to 0.8 percent.

The Treasury’s estimate for the economy this year had been released at the end of November. The minister said the number will be updated in the coming weeks, but avoided going into details. “We do not know if this review will be down,” he said.

Despite predicting low growth this year, Meirelles said investors are showing more interest in Brazil, especially after approval of the public sector spending ceiling and the presentation of the pension reform proposal.

“For the first time in years, Brazil is attracting the interest of the forum participants,” he said. “We expect the population to feel the effects of the resumption of growth throughout this year.”

The minister also cited the microeconomic reforms announced by the government a month ago as a stimulus for foreign investors. According to him, these measures will help companies that want to invest in the country.