{
  "title": "Press Release: IMF Executive Board Concludes 2014 Article IV Consultation with Brazil",
  "publication": "IMF News, April 10, 2015",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15167",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15167",
  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr15167/index.md",
  "summary": "The Executive Board concluded the Article IV Consultation with Brazil on March 16, 2015.",
  "publishDate": "2015-04-10",
  "sections": [
    {
      "heading": "Overview and outlook",
      "content": "- The Executive Board concluded the Article IV Consultation with Brazil on March 16, 2015.\n- Fund staff projects negative output growth of 1 percent in 2015, with a return to positive growth in 2016 conditional on successful implementation of fiscal adjustment and other policy actions.\n- The outlook is subject to significant downward risks, including drought-induced rationing of energy and water, the possible fallout from the Petrobras case, and a more adverse international environment."
    },
    {
      "heading": "Growth, demand, and inflation",
      "content": "- Growth has decelerated in recent years as the boost from decade-old reforms, expanding labor income, and favorable external conditions has lost steam.\n- Drivers of weakness:\n  - Sluggish investment reflecting eroding competitiveness, a worsening business environment, and lower commodity prices.\n  - Moderating consumption despite strong wage increases, as job creation has halted and financial conditions have tightened.\n- Inflation dynamics:\n  - Headline and core inflation have been near the upper-edge of the inflation tolerance band in recent years, due in part to sustained wage cost pressures, lingering indexation practices, and the ongoing drought.\n  - Longer-term inflation expectations rose since 2011, although they have edged down since end-2014.\n  - Moderating inflation in market-determined prices reflects tighter financial conditions and subdued activity, but new inflation pressures are emerging from the Real's nominal depreciation.\n- Monetary policy:\n  - The central bank hiked the monetary policy rate 375 basis points to 11 percent between April 2013 and April 2014.\n  - Policy tightening paused from May through September 2014.\n  - Between October 2014 and March 2015, the rate was increased by a cumulative 175 basis points."
    },
    {
      "heading": "External position and reserves",
      "content": "- Current account:\n  - Despite weakening domestic demand, the current account deficit reached 4.2 percent of GDP in 2014, up from 2.4 percent of GDP in 2012.\n  - Deterioration reflects worsening terms of trade, a drop in exports to Argentina, and an increase in fuel imports necessitated by the drought.\n- Competitiveness:\n  - Recent depreciation against the U.S. dollar has not translated one-for-one into gains against competitors.\n  - Persistently high unit labor costs continue to dampen competitiveness; the real was still overvalued at end-2014.\n- Reserves and capital flows:\n  - FDI financed more than 70 percent of the current account deficit in 2014.\n  - At about US$362 billion, gross international reserves (cash concept) are well above the IMF’s reserve adequacy metric and other standard benchmarks.\n  - Capital flows have remained stable and portfolio inflows have been buoyant."
    },
    {
      "heading": "Public finances and fiscal strategy",
      "content": "- Fiscal outcomes:\n  - In 2013, the non-financial public sector (NFPS) primary balance declined to 1.9 percent of GDP, undershooting its 2.3 percent target.\n  - The NFPS primary balance reached -0.6 percent of GDP in 2014 despite one-off measures of about ½ percent of GDP.\n  - NFPS gross debt increased to 71 percent of GDP.\n  - Declining growth and weak fiscal performance affected Brazil’s sovereign credit rating in 2014: Standard & Poor’s cut Brazil’s credit rating to BBB- in March 2014; in September 2014, Moody’s revised Brazil’s sovereign rating outlook to negative.\n- Government strategy since January 2015:\n  - Ambitious fiscal adjustment to bring the primary surplus of the nonfinancial public sector to 1.2 percent of GDP in 2015 and to at least 2 percent of GDP in 2016 and 2017.\n  - Measures aim first to stabilize NFPS gross debt and then put it on a downward trajectory.\n  - The strategy includes targets for 2015−17, the decision to end policy lending to public banks, and emphasis on reducing gross debt ratios.\n- Executive Directors’ fiscal guidance:\n  - Achieving budget targets requires ambitious, front-loaded measures.\n  - Support for cuts in current expenditures and tax exemptions to make room for priority spending on investment and social programs.\n  - Many Directors pointed to the benefits of targeting a higher primary surplus over the next two years, though some cautioned about growth impacts.\n  - Continued fiscal reforms recommended to reduce budget rigidities, simplify the tax system, and address structural sources of fiscal pressure, including the pension and wage indexation systems."
    },
    {
      "heading": "Financial sector and banking system",
      "content": "- System soundness:\n  - Banking system soundness indicators remain favorable, showing adequate levels of capitalization and provisioning as confirmed by stress tests.\n  - Private sector leverage and past expansion of public bank lending are potential sources of stress.\n- Recommendations:\n  - Monitor banks’ balance sheets and corporate leverage in the low-growth environment.\n  - Enhance bank supervision, including for public banks, and apply targeted microprudential measures as needed.\n  - Directors were encouraged by significant progress in implementing key recommendations of the Financial Sector Assessment Program."
    },
    {
      "heading": "Structural and supply-side reforms",
      "content": "- Directors’ priorities:\n  - Strengthen policy credibility and market confidence, boost investment and competitiveness, and reinforce the foundation for strong, balanced, and sustainable growth.\n  - Strengthened governance frameworks in state-owned enterprises; immediate priority to address problems at the state-owned oil company.\n  - Supply-side reforms critical for boosting productive capacity and growth potential, with priority on infrastructure investment, tax efficiency, improving the business climate, and fostering international trade.\n  - Prioritization of reforms and greater private sector participation emphasized as keys to success."
    },
    {
      "heading": "Key statistics (selected, as reported)",
      "content": "- Growth and prices:\n  - Fund staff projects: -1 percent GDP growth in 2015.\n  - Consumer price index (IPCA, end of period): 6.5 (2011); 5.8 (2012); 5.9 (2013); 6.4 (2014); 7.0 (2015); 4.8 (2016); 4.5 (2017).\n- External and reserves:\n  - Current account deficit: 4.2 percent of GDP (2014); 2.4 percent of GDP (2012).\n  - Gross international reserves (cash concept): about US$362 billion.\n  - FDI financed more than 70 percent of the current account deficit in 2014.\n- Public finances:\n  - NFPS primary balance: 1.9 percent of GDP (2013); -0.6 percent of GDP (2014).\n  - NFPS gross debt: 71 percent of GDP (2014).\n  - Central government primary balance and NFPS overall balance figures are reported in the Selected Economic and Social Indicators table.\n- Social and demographic snapshot:\n  - Area (thousands of sq. km): 8,512.\n  - Population total (million, est., 2013): 198.3.\n  - GDP (2013): R$4,845 billion; US$2,246 billion.\n  - GDP per capita (est., 2013): US$11,326 billion.\n  - Poverty rate (in percent, 2013): 15.1.\n  - Gini coefficient (2013): 49.5.\n- Balance of payments (selected, in billion of U.S. dollars):\n  - Exports: 256.0 (2011); 242.6 (2012); 242.0 (2013); 225.1 (2014); 212.3 (2015 est.).\n  - Imports: -226.2 (2011); -223.2 (2012); -239.6 (2013); -229.0 (2014); -202.4 (2015 est.).\n  - Current account (memorandum, in percent of GDP): -2.4 (2011); -3.5 (2012); -3.4 (2013).\n- Other macro indicators are provided in the \"Brazil: Selected Economic and Social Indicators\" table included in the source.\n\nPress Release No. 15/167 — IMF Executive Board Concludes 2014 Article IV Consultation with Brazil (April 10, 2015).\n\n---\n\n\n References\n\n- Brazil and the IMF\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15167"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2015/09/14/01/49/pr15167/index.md)",
    "[Structured JSON version](/en/news/articles/2015/09/14/01/49/pr15167/index.json)",
    "[Bundle manifest](/en/news/articles/2015/09/14/01/49/pr15167/bundle-manifest.json)",
    "Published: April 10, 2015",
    "The Executive Board concluded the Article IV Consultation with Brazil on March 16, 2015.",
    "Fund staff projects negative output growth of 1 percent in 2015, with a return to positive growth in 2016 conditional on successful implementation of fiscal adjustment and other policy actions.",
    "The outlook is subject to significant downward risks, including drought-induced rationing of energy and water, the possible fallout from the Petrobras case, and a more adverse international environment.",
    "Growth has decelerated in recent years as the boost from decade-old reforms, expanding labor income, and favorable external conditions has lost steam.",
    "Drivers of weakness:",
    "Inflation dynamics:",
    "Monetary policy:",
    "Current account:",
    "Competitiveness:",
    "Reserves and capital flows:",
    "Fiscal outcomes:",
    "Government strategy since January 2015:",
    "Executive Directors’ fiscal guidance:",
    "System soundness:",
    "Recommendations:",
    "Directors’ priorities:",
    "Growth and prices:",
    "External and reserves:",
    "Public finances:",
    "Social and demographic snapshot:",
    "Balance of payments (selected, in billion of U.S. dollars):",
    "Other macro indicators are provided in the \"Brazil: Selected Economic and Social Indicators\" table included in the source.",
    "[Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2015/09/14/01/49/pr15167/index.md",
    "json": "/en/news/articles/2015/09/14/01/49/pr15167/index.json",
    "bundleManifest": "/en/news/articles/2015/09/14/01/49/pr15167/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-26T21:16:40.388Z"
}