Growth, international economy and reforms

BRAZIL ECONOMICS - Report 21 Oct 2019 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The discussions at the annual IMF meetings always stimulate improvement of scenarios and forecasts. During the last one, the consensus was that the global economy would continue decelerating, largely due to the risks from geopolitical conflicts, the US-China trade war and the Brexit. Hence, the gradual recovery of the Brazilian economy cannot count on any stimulus from abroad. It also was clear that although movement toward fiscal consolidation has contractionary effects on GDP, progress of the reform agenda is the only way to reestablish sustainable growth in Brazil. Until the reforms are approved and implemented, only monetary policy can be used to improve on the slow economic recovery.

In the World Economic Outlook (WEO) for October, the IMF revised the projection for global growth downward for the fifth time in a row. In July, this projection was 3.2%, and it has now fallen to 3% - the smallest growth rate since the recovery from the crisis of 2008-09. The two main reasons indicated by the IMF are the effects on global distribution chains triggered by the trade war between the US and China and the Brexit. Besides this, the WEO mentioned risks on the downside – of even worse growth.

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