IMF Executive Board Concludes 2024 Article IV Consultation with Brazil
IMF News, July 11, 2024
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- Published: July 11, 2024
Overview and near-term outlook
- The Executive Board concluded the Article IV consultation with Brazil.
- Real GDP growth in 2023: 2.9 percent (driven by record agricultural and hydrocarbon output, and resilient services).
- Growth projected for 2024: 2.1 percent (factors: still restrictive monetary policy, a lower fiscal deficit, the flood calamity in Rio Grande do Sul, and the normalization of agricultural output).
- Medium‑term growth projection: 2.5 percent (an upward revision of 0.5 percentage point since the 2023 Article IV Consultation, supported by efficiency gains from the VAT reform and growing hydrocarbon output).
- Headline inflation: expected to return to the 3 percent target in the first half of 2026.
Balance of risks
- Board view: balance of risks improved since the 2023 Article IV Consultation but remains somewhat tilted to the downside; uncertainty persists.
- Downside risks:
- Possible monetary policy miscalibration in major economies.
- Commodity price volatility.
- Global financial instability.
- More severe domestic supply disruptions from the 2024 flood calamity.
- Uncertainty over fiscal measures reducing policy credibility, raising borrowing costs, and increasing risk of inflation expectations de‑anchoring.
- Upside risks:
- Stronger‑than‑expected household consumption.
- Faster implementation of productivity‑enhancing reforms.
- Investment in green growth opportunities.
- Resilience factors:
- Sound financial system.
- Adequate FX reserves.
- Low reliance on FX debt.
- Large government cash buffers.
- Flexible exchange rate.
Executive Board Assessment and policy recommendations
- Commendations:
- Remarkable resilience during the disinflation process.
- Progress advancing an ambitious agenda for sustainable and inclusive growth.
- Authorities’ commitment to improving the fiscal position and the VAT reform.
- Decisive efforts to bring down inflation and careful pace of monetary policy easing consistent with the inflation targeting framework.
- Flexible exchange rate regime and adequate FX reserves as shock buffers.
- Progress on financial inclusion, efficiency, competition, and financial innovation.
- Progress on Brazil’s Ecological Transformation Plan, commitment to halt illegal deforestation, new carbon market framework, and instruments to attract longer‑term green financing.
- Fiscal recommendations:
- Sustain and pursue a more ambitious fiscal effort to put public debt on a firmly downward path and open space for priority investments.
- Broaden the tax base, rationalize inefficient tax expenditures, tackle budget rigidities, and enhance efficiency of social transfer programs.
- Strengthen the fiscal framework with a strong medium‑term fiscal anchor to reinforce credibility and sustainability.
- Monetary recommendations:
- Maintain flexibility on the pace and length of the easing cycle.
- Preserve credibility of the monetary policy framework and the 3‑percent inflation target.
- Financial sector recommendations:
- Continue strengthening oversight of non‑bank financial institutions.
- Address households’ debt burden and lower credit costs.
- Carefully manage a bigger role for public banks to mitigate risks to the fiscal position, monetary policy transmission, and market efficiency.
- Provide the Central Bank of Brazil (BCB) with flexibility to cover operating expenses to support technological innovations.
- Structural and environmental recommendations:
- Advance trade integration, strengthen anti‑corruption and AML/CFT frameworks, and facilitate skills upgrading to raise potential growth.
- Continue implementing the Ecological Transformation Plan and instruments to attract green financing.
Key quantitative projections and indicators (selected from Table 1)
- Population (2023): Total (millions) 216.3; Annual rate of growth (percent) 0.7; Density (per sq. km.) 25.4.
- GDP:
- GDP, local currency (2023): R$10,856 billion.
- GDP, dollars (2023): US$2,174 billion.
- GDP per capita (2023): US$10,050.
- Labor and social:
- Unemployment rate (Q1, 2024): 7.9.
- Life expectancy at birth (years): 75.5.
- Poverty rate (in percent, 2022): 31.6.
- Inflation and prices:
- Consumer prices (IPCA, average): 2022: 9.3; 2023: 4.6; 2024 (Proj.): 4.0; 2025 (Proj.): 3.2.
- Consumer prices (IPCA, end of period): 2023: 5.8.
- GDP deflator: 2022: 8.5; 2023: 4.7; 2024 (Proj.): 5.0; 2025 (Proj.): 3.5.
- Real activity (annual percentage change, GDP at constant prices):
- 2022: 3.0; 2023: 2.9; 2024 (Proj.): 2.1; 2025 (Proj.): 2.5.
- Investment and saving:
- Investment (GFCF) growth: 2022: 1.1; 2023: -3.0; 2024 (Proj.): 0.8; 2025 (Proj.): 0.9.
- Gross national saving (percent of GDP): 2022: 19.2; 2023: 21.9; 2024 (Proj.): 20.5.
- Public finances:
- Central government primary balance (national representation, incl. BCB) 4/: 2022: -3.6; 2023: -7.2; 2024 (Proj.): -6.4; 2025 (Proj.): -6.3; 2026 (Proj.): -5.5; 2027 (Proj.): -5.1; 2028 (Proj.): -4.6; 2029 (Proj.): -4.2.
- Net public sector debt: 2022: 56.1; 2023: 60.9; 2024 (Proj.): 61.4; 2025 (Proj.): 65.9; 2026 (Proj.): 68.3; 2027 (Proj.): 70.0; 2028 (Proj.): 71.1; 2029 (Proj.): 71.8.
- General government gross debt, Authorities’ definition: 2022: 71.7; 2023: 74.4; 2024 (Proj.): 77.1; 2025 (Proj.): 80.5; 2026 (Proj.): 82.1; 2027 (Proj.): 83.4; 2028 (Proj.): 84.0; 2029 (Proj.): 84.3.
- General government gross debt: 2022: 83.9; 2023: 84.7; 2024 (Proj.): 87.5; 2025 (Proj.): 91.2; 2026 (Proj.): 93.1; 2027 (Proj.): 94.5; 2028 (Proj.): 95.1; 2029 (Proj.): 95.4.
- External sector (Billions of U.S. dollars, unless otherwise specified):
- Trade balance: 2022: 44.2; 2023: 80.6; 2024 (Proj.): 78.2; 2025 (Proj.): 80.4; 2026 (Proj.): 90.0; 2027 (Proj.): 100.9.
- Exports: 2022: 340.3; 2023: 344.4; 2024 (Proj.): 345.6; 2025 (Proj.): 350.4; 2026 (Proj.): 357.1; 2027 (Proj.): 369.3; 2028 (Proj.): 380.1; 2029 (Proj.): 391.7.
- Imports: 2022: 296.2; 2023: 263.8; 2024 (Proj.): 267.4; 2025 (Proj.): 270.0; 2026 (Proj.): 273.8; 2027 (Proj.): 279.3; 2028 (Proj.): 284.7; 2029 (Proj.): 290.8.
- Current account: 2022: -48.3; 2023: -30.8; 2024 (Proj.): -40.0; 2025 (Proj.): -40.8; 2026 (Proj.): -42.9; 2027 (Proj.): -44.7; 2028 (Proj.): -45.5; 2029 (Proj.): -47.4.
- Foreign direct investment (net inflows): 2022: 41.3; 2023: 36.0; 2024 (Proj.): 37.2; 2025 (Proj.): 38.7; 2026 (Proj.): 40.3; 2027 (Proj.): 41.8; 2028 (Proj.): 43.4; 2029 (Proj.): 45.1.
- Total external debt (in percent of GDP): 2022: 34.9; 2023: 33.7; 2024 (Proj.): 32.6; 2025 (Proj.): 32.3; 2026 (Proj.): 31.0; 2027 (Proj.): 28.6; 2028 (Proj.): 27.5.
- Memorandum items:
- Output Gap: 2022: 0.4; 2023: 0.2; 2024 (Proj.): 0.0.
- Current account (in percent of GDP): 2022: -2.5; 2023: -1.4; 2024 (Proj.): -1.8; 2025 (Proj.): -1.7; 2026 (Proj.): -1.6.
- Unemployment rate 7/: 2022: 7.6; 2023: 7.4; 2024 (Proj.): 7.5.
- Gross official reserves (in US$ billions): 2022: 325; 2023: 355.
- REER (annual average in percent; appreciation +): 2022: 12.1.
- Selected social and health indicators:
- Agricultural land (percent of land area): 30.2.
- Physicians per 1000 people (2023): 2.6.
- Hospital beds per 1000 people (2023) 1/: 2.4.
- Access to safe water (2022): 88.0.
- Net enrollment rates, percent in primary education: 99.4; secondary education: 92.2.
- Adult illiteracy rate: 5.4.
- Infant mortality (per thousand live births): 12.6.
- Palma ratio 3/: 3.6.
- Gini coefficient (post taxes and transfers): 51.8.
- Main export products: airplanes, metallurgical products, soybeans, automobiles, electronic products, iron ore, coffee, and oil.
Source: IMF Press Release No. 24/268 — IMF Executive Board Concludes 2024 Article IV Consultation with Brazil.
