Meirelles on Bloomberg: "Brazilian recession to end soon"

Meirelles on Bloomberg: “Brazilian recession to end soon”

During the interview, Meirelles said that the government has reached its limit of concessions around the pension system reform
Brazil Business

According to Finance Minister Henrique Meirelles, the Brazilian recession will end soon. In fact, in the first quarter of this year. He made the statement during an interview with Bloomberg News and TV in Washington DC.

Forecasts have Brazil growing between 0.5 and 0.7 percent quarter-on-quarter in the three months ending in March. Meirelles expects a 2.7-percent expansion when compared with 2016’s last quarter.

Bloomberg Markets’ host Erick Schatzer asked Meirelles why he and his ministry consistently overestimate the performance of the Brazilian economy. Schatzer cited that the Ministry of Finance took down its forecast from 1.6 to 1.0 to 0.5 percent.

“The reason is that Brazil had a much worst-than-expected recession last year. And then, the GDP further declined and we had a lower basis to start the year with,” said Meirelles. “But we are already growing month-on-month.”

Much-needed reforms

For the Brazilian recession to be over, of course, major reforms must be carried out. No other reform is as urgent as the pension system reform. As Congress has consistently forced the government to concede on core points of the reform, Meirelles said there is not much room left for negotiations.

“We’re at the limit or very close to the limit,” he said, adding that he wants to ensure an economy of at last 600 billion BRL ($190 billion). With the concessions, the effects of the reform could be cut down to roughly half of the government’s expectations.

IMF prediction

The International Monetary Fund (IMF) estimated growth for the Brazilian economy in 2018. According to the fund’s last report, the Brazilian GDP should post a 1.7 percent growth. 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.