Brazil's economy projected to rise in 2018, but not without reforms

Brazil’s economy projected to rise in 2018, but not without reforms

The IMF report targeted "unsustainable" government programs like social security
Brazil Business

The International Monetary Fund (IMF) estimated a 1.7 percent growth in Brazil’s economy in their Tuesday report. Projections are up 0.2 percent from earlier reports, which had growth at 1.5 percent.

As for 2017, the GDP index projection went down in January. Then, in March, projections went down from 1 to 0.48 percent. But despite the slow growth, this year still represents an improvement from the last two dismal years. In 2016, the GDP shrunk by 3.6 percent, and the previous year by 3.8 percent.

Furthermore, the market has expanded by 40 percent for this year according to the Central Bank’s latest Focus report. This latest edition revealed yet another bold 1% cut in Brazil’s Selic benchmark rate by the Central Bank’s Monetary Policy Committee, who will meet on May 30-31. Economists expect a gradual reduction of the Selic rate from 11.25% to 8.5%, which would remain stable until the end of 2018. As for growth in 2018, Brazilian analysts project a high of 2.5 percent.

Ambitious reforms

In order to see growth, the IMF emphasized Brazil’s need for “ambitious reforms”. In particular, the fund encouraged Brazil to rid itself of “unsustainable” expenses like the pension system, public healthcare, and welfare.

Furthermore, the IMF encouraged Brazil to increase investments and productivity, get rid of infrastructure bottlenecks, simplify the tax system, and reduce commercial barriers.