IMF Improves Brazil’s GDP Outlook for 2016 and 2017

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The interim government in Brazil celebrated the news that the International Monetary Fund (IMF) reduced its negative outlook forecast for the country’s GDP in 2016, from 3.8 percent in April to 3.3 percent in July. The international entity also forecast a mild growth in 2017 from zero growth in its April report to 0.5 percent in the latest estimate.

“Consumer and business confidence appears to have bottomed out in Brazil, and the GDP contraction in the first quarter was milder than anticipated. Consequently, the 2016 recession is now projected to be slightly less severe, with a return to positive growth in 2017,” stated the forecast update by the entity, released on Tuesday. For the entity economic growth should only be expected in 2018.

The forecast for GDP growth in emerging economies as a whole remained the same as in April, 4.1 percent in 2016 and 4.6 percent in 2017. The IMF, however, is now forecasting a reduction in GDP growth for the world economy, due to the decision by the UK to leave the European Union. According to the entity the world GDP growth forecast declined by 0.1 percent for both this year and next since the April forecast, to 3.1 percent in 2016 and 3.4 percent in 2017.

Brazilian economic consultancies are also more positive about activity growth this year and next. In the latest Central Bank’s Focus Report survey, forecasts for GDP growth improved from a negative 3.30 percent to a negative 3.25 percent this year.

Yet not all have a less gloomy outlook on Brazil’s economic scenario. Last month, another international organization, the World Bank, increased the decline of Brazil’s GDP from 2.5 percent in January to four percent in June. According to this entity’s forecasts, in 2017 the country will still register a decline in growth (by 0.2 percent) and only start to show positive activity growth in 2018.