Brazilian economy seeks positive momentum

A late April downwardly revised economic forecast for Brazil points to the economic uncertainties in that nation, which has been characterized in another recent report as having a history of boom and bust cycles.

A Bloomberg news item says a survey of analysts conducted by Brazil’s central bank shows the average forecaster predicting a 1.71 gross domestic product (GDP) growth rate for the South American nation in 2019. Bloomberg says that rate would represent “the lowest [GDP growth rate] level ever in a signal of mounting investor pessimism in Latin America’s largest economy.”

The previous survey just one week earlier led to 1.95 percent forecast, while one year ago the same analysts were predicting, on average. 3 percent GDP growth for 2019.

Brazil’s President Jair Bolsonaro, who took office in January, is the latest in a line of presidents who will try to govern the nation in a way that will usher in stable economic growth.

A 382-page report prepared by the Washington-based International Monetary Fund (IMF), also released in April, characterizes the nation’s economy with a report titled “Brazil: Boom, bust and the road to recovery.”

A foreword to that report written by an IMF deputy managing  director reviews the ups and downs of Brazil’s economy since World War II and adds, “Brazil now faces a moment of opportunity, with the economy emerging gradually from the recession, albeit with significant domestic and external downside risks.”

Deputy Executive David Lipton adds, “Brazil can turn the corner by pursuing much-needed reforms to place the economy on a stronger footing.” He also notes, however, that many stakeholders are likely “fatigued” by earlier reform efforts.

Within the lengthy report, its editors Antonio Spilimbergo and Krishna Srinivasan write, “over the past 40 years or so since the recession of 1981, Brazil’s economic performance has been mediocre, marked by more downs than ups, with annual GDP growth averaging 2.6 percent.”

The co-editors acknowledge reform efforts have been attempted, but write that “poor growth in recent years reflects backpedaling on some of these reforms, owing largely to the role of an activist state and its distrust of markets; riskier macroeconomic policy choices; and, most importantly, structural factors, including, but not limited to, fiscal malaise and the closed nature of the Brazilian economy.”

Spilembergo, Srinivasan and their colleagues stress that reforms aimed at opening up the economy, closing infrastructure gaps, improving the efficiency of credit allocation, and improving the functioning of the government and its institutions “hold the key to improving the economy’s productive potential.”