Brazil : Boom, Bust, and Road to Recovery

Books, March 14, 2019

Source details

Brazil is at crossroads, emerging slowly from a historic recession that was preceded by a huge economic boom.
Reasons for the historic bust following a boom are manifold.
Policy mistakes were an important contributory factor, including the pursuit of countercyclical policies, introduced to deal with the effects of the global financial crisis, beyond the point where they were helpful.
More fundamentally, the bust reflects longstanding structural weaknesses plaguing the economy that also help explain Brazil’s uninspiring growth performance over the past four decades.

Slow recovery from a historic recession following a preceding huge economic boom.
Policy mistakes amplified the downturn; specific example cited is the continuation of countercyclical policies past their useful point.
Structural weaknesses are a deeper, more persistent cause of underperformance.

Longstanding structural weaknesses are identified as central to Brazil’s uninspiring growth performance.
These weaknesses help explain both the severity of the bust and the slow recovery.

Countercyclical policies, initially used to mitigate the global financial crisis, were extended beyond when they were helpful and contributed to the economic bust.
Policy design and timing are highlighted as important factors in the boom–bust cycle.

Recovery is characterized as slow, constrained by both past policy choices and persistent structural issues.
Addressing structural weaknesses is implied as necessary for improving medium- and long-term growth performance.

Source: Brazil : Boom, Bust, and Road to Recovery (IMF web landing page, March 14, 2019).