IMF slightly revises growth forecast for Brazil’s GDP in 2021

RIO DE JANEIRO, BRAZIL – In a report released on Tuesday, April 6, the International Monetary Fund (IMF) hardly changed its forecasts for the growth of the Brazilian economy in 2021 and 2022, despite the restrictive measures adopted by several governors and mayors to contain the spread of Covid-19 in various parts of the country.

In the latest “World Economic Outlook” report, published during the entity’s annual meeting, the IMF estimates that Brazil’s Gross Domestic Product (GDP) will grow 3.7% this year, up 0.1 percentage point from the report released in January. For 2022, the expansion forecast was maintained at 2.6%.

The growth forecast for Brazil is lower than that estimated for some countries in the region. Mexico, for example, should grow 5% in 2021 – an increase of 0.7 percentage points compared to January – and 3% in 2022, according to IMF economists. But the Brazilian economy was less affected by the pandemic last year, with a retreat of 4.1% against 8.2% for Mexico.

This difference largely reflects the lack of measures to support the Mexican government’s household income and business throughout the pandemic.

The IMF forecasts are more optimistic than the estimates made by the financial market. In the last Focus Bulletin, released yesterday by the Central Bank, the Brazilian economy was expected to grow 3.17% in 2021 and 2.33% in 2022.

In the report, the IMF states that “thanks to the recovery of global manufacturing in the second half of 2020”, the economic growth exceeded expectations in some major exporting countries in Latin America and the Caribbean, including Brazil. Thus, the Brazilian result contributed to the region’s GDP forecast raised in 2021 to 4.6% – up 1 percentage point from January’s estimates.

“However, the long-term view continues to depend on the trajectory of the pandemic. With some exceptions (e.g., Chile, Costa Rica, and Mexico), most countries have not secured sufficient vaccines to serve their populations,” the IMF points out.

In the statement commenting on the report’s findings, IMF Chief Economist Gita Gopinath did not cite Brazil but said countries generally should maintain supportive economic policies to mitigate the effects of the covid-19 crisis and plan to have fiscal space to extend them longer if necessary.

She also recommended that governments maintain an “accommodative” monetary policy as long as inflation is well controlled. Last month, however, the Central Bank raised Brazil’s key interest rate to 2.75 percent, the first Selic hike in nearly six years, over concerns about meeting this year’s inflation target.

Source: Valor Investe

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