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IMF sees stronger growth of Brazilian economy in 2017 and 2018

Projections

International entity cited increased consumption as one of the factors that led to the upward revision of national GDP estimates

Better economic environment, recovery of confidence and consumption, as well as the structural reform agenda caused the International Monetary Fund (IMF) to revise upward projection for the growth of the Brazilian economy.

In a report released on Tuesday (10), the international entity raised the gross domestic product (GDP) growth estimate from 0.3% to 0.7% this year and from 1.3% to 1.5% 2018.

"A record crop and momentum in consumption, including the possibility for workers to draw resources from indemnity accounts (FGTS), led to a upward revision [of the projection], " the document says.

This year, the government allowed the withdrawal of inactive accounts from the FGTS, which resulted in an injection of more than R $ 40 billion directly into the economy. This led to an increase in household consumption, boosting GDP performance in the second quarter of the year.

Expenses and reforms

In addition to the estimates, the IMF report advocated expenditure adjustment measures, especially social security reform, as necessary to build confidence and ensure an increase in private sector investment.

"In Brazil, tackling unsustainable expenditures, including reforming the pension system, is of paramount importance to restore stronger confidence and create sustainable growth of private investment," the IMF says.

Considered essential in order to avoid even greater growth in social security expenditures and to prevent a collapse of public accounts, the Pension Plan provides for the adoption of a minimum age of 65 for men and 62 years for women to access the benefit.

Infrastructure

In the case of the infrastructure sector, the agency said that the efforts of the Brazilian government to make concession projects more palatable to investors will reduce barriers and meet the demands of the domestic market.

"Continued efforts to make infrastructure concessions more attractive to investors while increasing governance standards and the format of the [concessions] program can help ease bottlenecks and sustain short-term demand," the report said.

Only oil and energy infrastructure auctions have shown that investor appetite in Brazil is high. The competitions had a lot of competition and took around R $ 16 billion directly to the public coffers. The expectation this year, according to an evaluation report on revenues and expenses, is that the concessions total R $ 28.6 billion in 2017.

Source: Government of Brazil, with information from the  IMF