The International Monetary Fund (IMF) reduced its projection for Brazil’s GDP growth this year to 2.1 percent, down 0.1 percentage points from April’s estimate. For next year, however, the global lender forecasts that Latin America’s largest economy will expand 2.4 percent, up from the 2.1 percent forecast three months ago. The review was mainly motivated […]
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The International Monetary Fund (IMF) reduced its projection for Brazil’s GDP growth this year to 2.1 percent, down 0.1 percentage points from April’s estimate. For next year, however, the global lender forecasts that Latin America’s largest economy will expand 2.4 percent, up from the 2.1 percent forecast three months ago.
The review was mainly motivated by the possible impacts of the climate tragedy in Rio Grande do Sul — the Brazilian state devastated by unprecedented floods between May and June. The efforts around the state’s reconstruction and other factors, such as an acceleration in hydrocarbon production, were the variables considered for reviewing next year’s forecast upwards.
Domestic analysts — such as Itaú and XP — have not changed their projections. They expect the tragedy in Rio Grande do Sul to have lower-than-expected negative effects on the country’s overall economic performance, backed by data suggesting that the state’s recovery is already being felt.
The IMF, meanwhile, expects the reconstruction efforts to last and positively impact the country’s economy numbers beyond the second half of this year.
Combined with a moderation in demand in Mexico, the revision of Brazil’s projections has also led to a 0.1 percentage point reduction in the growth forecast for Latin America and the Caribbean this year, to 1.9 percent.
Globally, the IMF kept its growth projections at 3.2 percent in 2024 and 3.3 percent in 2025. The global lender sees services inflation getting in the way of the disinflationary process, “which is complicating monetary policy normalization.” This scenario, according to the IMF, is leading economies to raise the prospect of higher interest rates for even longer. “The policy mix should thus be sequenced carefully to achieve price stability and replenish diminished buffers,” writes the organization.
The forecast is somewhat in line with other international organizations. In May, the Organization for Economic Co-operation and Development (OECD) projected a global average growth of 3.1 percent this year and a GDP expansion of 1.9 percent for Brazil. A month later, in June, the World Bank forecasted a 2 percent growth for Brazil, up 0.5 percentage points from its previous estimate in January.
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