Reigniting Strong and Inclusive Growth in Brazil

IMF Blog, May 28, 2015

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Brazil has made "remarkable social gains over the past decade and a half."
Millions of families have been lifted from extreme poverty.
Access to education and health has improved through well-targeted social interventions such as Bolsa Familia, the conditional cash transfer program.
On-the-ground example: Complexo do Alemão in Rio de Janeiro features infrastructure (a recently built cable car) and station-based services that connect residents to the city and host services including a youth center, a social assistance center, a public library, a training center for micro-entrepreneurs, and a small branch of the bank that distributes Bolsa Familia monthly grants.
Micro-entrepreneur programs have supported women entrepreneurs (examples cited: day care enabling work; small cosmetics businesses; hostel management) and youth activities (capoeira at the youth center).

Primary fiscal targets announced by the government:
- Primary surplus target of 1.2 percent of GDP in 2015.
- Primary surplus target of at least 2 percent of GDP in 2016 and 2017.
Policy lending to banks is being ended, and these measures are expected to help stabilize gross public debt and put public debt on a declining path.
The government is reducing or eliminating inefficient, untargeted, and costly subsidies; key administered prices were adjusted, notably those of electricity and fuels.
Monetary policy objective:
- The central bank is aiming to bring inflation down to the 4.5 percent target and to help prevent second round effects from increases in administered prices and the depreciation of the real.

The government is implementing supply-side measures such as the infrastructure concession program.
The IMF’s recent report on the Brazilian economy discusses additional reforms aimed at improving competitiveness and increasing the economy’s productive potential; some of these reforms are under consideration by the government.

Brazil faces a more difficult external environment due to continued slowdown in global demand, a challenge shared with other Latin American countries.
Short-term demand may be affected by economic policies, but the measures are expected to benefit Brazilians in the longer run.
As measures take hold, improved credibility and confidence should enable a return to positive growth in 2016 (as noted at the Central Bank’s Inflation Targeting Seminar).

The big challenge identified is implementation of the announced policies and reforms.
The IMF supports Brazil’s efforts to:
- Strengthen fiscal policy (including meeting the announced primary surplus targets).
- Strengthen monetary policy (including achieving the 4.5 percent inflation target).
- Maintain successful social policies while ensuring fiscal sustainability.

Author: Christine Lagarde — May 28, 2015

Reativar o crescimento forte e inclusivo no Brasil; Christine Lagarde; 28 de maio de 2015
- Reativar o crescimento forte e inclusivo no Brasil; Christine Lagarde; 28 de maio de 2015 (Markdown version)
- Reativar o crescimento forte e inclusivo no Brasil; Christine Lagarde; 28 de maio de 2015 (PDF)