Home Business IMF reduces Brazil’s growth forecast to 1.8 percent in 2018

IMF reduces Brazil’s growth forecast to 1.8 percent in 2018

In addition to the stoppage of the truck drivers, the uncertainty of the elections weighs, says Werner

IMF Director for the Americas Alejandro Werner


Assigning the decision to truckers’ standstill and worsening global economic conditions, the IMF (International Monetary Fund) revised down on Monday (23), the forecast for growth in Brazil in 2018.

The estimate now is for the country to grow 1.8% this year – before that number was 2.3%.

The announcement interrupts an improvement in the outlook for the Brazilian economy, according to the Fund: since last year, the agency has been revising its forecasts for the country upward, starting from an initial expectation of 1.5% and reaching 2.3% three months ago.

IMF Director for the Americas Alejandro Werner said the May truck stoppage that lasted about 10 days was a “very important” factor in this review.

Also weighed the uncertainty of the presidential election – whose outcome can still change the growth forecasts down.

The IMF has once again stressed the need for a pension reform in Brazil, considered as “a fundamental measure” towards fiscal balance.

But Werner said the country should maintain its moderate growth rate, driven by private consumption and investment. For 2019, the fund maintained a forecast of 2.5% growth.

The economist considered that the economic recovery in Latin America has been more difficult for some countries.

“Market pressures at the global level have been amplified by specific vulnerabilities,” he said, citing tensions in international trade after the introduction of US tariffs and stricter financial conditions.

The growth forecast for the region also fell, from 2% to 1.6%, compared to April.

Last week, the economic team of the Temer government confirmed that the projection for GDP was revised up from 2.5% to 1.6% this year because of the truckers’ standstill.

The deterioration of expectations also caused the Ministry of Finance to cut the forecast for the expansion of activity in 2019 from 3.3% to 2.5%.

The International Monetary Fund (IMF) also cut today’s forecasts for economic growth in Central America this year to 3.3%, six tenths less than what was estimated in April, mainly due to political uncertainty in Nicaragua.

“The political uncertainty in Nicaragua and the temporary interruptions of the construction sector in domestic demand in Panama lead to a small downward revision in 2018,” said the director of the Western Hemisphere Department of the IMF, Alejandro Werner, in its update of the regional economic perspectives.

However, the Fund slightly increased the region’s economic expectations for 2019 to 4.1%, one tenth more than expected three months ago.

In this sense, Werner explained that the solid growth of the United States and the greater remittances associated with the uncertainty about the future migration policies of the Donald Trump government mean that Central America and the Dominican Republic continue to grow at a good pace.

In fact, the multilateral organization reflected in its analysis that the good role of the United States continues to benefit the countries of the region “with close ties” to the North American nation.