## IMF Executive Board Concludes 2021 Article IV Consultation with Brazil _IMF News, September 22, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Brazil](https://www.imf.org/en/news/articles/2021/09/22/pr21274-brazil-imf-executive-board-concludes-2021-article-iv-consultation-with-brazil) ## Other formats - [Markdown version](/en/news/articles/2021/09/22/pr21274-brazil-imf-executive-board-concludes-2021-article-iv-consultation-with-brazil/index.md) - [Structured JSON version](/en/news/articles/2021/09/22/pr21274-brazil-imf-executive-board-concludes-2021-article-iv-consultation-with-brazil/index.json) - [Bundle manifest](/en/news/articles/2021/09/22/pr21274-brazil-imf-executive-board-concludes-2021-article-iv-consultation-with-brazil/bundle-manifest.json) ## Bibliographic details - Published: September 22, 2021 --- ### Overview - Executive Board concluded the Article IV consultation with Brazil on September 10, 2021; press release dated September 22, 2021 (Press Release No. 21/274). - Economic performance has been better than expected, aided by the authorities’ forceful policy response. - GDP regained its pre-pandemic level in 2021Q1; momentum supported by booming terms of trade and robust private sector credit growth. - COVID-19 impact: pandemic has claimed more than 550,000 Brazilians; renewed lockdowns and vaccination rollout reduced infections since April; government procured sufficient doses to inoculate the adult population in 2021 with the most vulnerable expected to be fully inoculated by the end of the year. ### Economic outlook and projections - Real GDP projected to grow by 5.3 percent in 2021. - Inflation: expected to fall steadily from recent peaks toward the mid-point of the target range by end-2022. - Public debt: - Public debt jumped to 99 percent of GDP in 2020. - Public debt expected to drop sharply to 92 percent of GDP in 2021 and remain around that level over the medium-term. - Key projected indicators (selected): - GDP at current prices: 2020 = 0.6; 2021 = 15.0; 2022 = 7.8; 2023 = 6.1; 2024 = 6.2 - GDP at constant prices (percentage change): 2017 = 1.3; 2018 = 1.8; 2019 = 1.4; 2020 = -4.1; 2021 = 5.3; 2022 = 1.9; 2023 = 2.0; 2024 = 2.1 - Consumer prices (IPCA, end of period): 2017 = 2.9; 2018 = 3.7; 2019 = 4.3; 2020 = 4.5; 2021 = 3.3; 2022 = 3.0 - Net public sector debt (percent of GDP): 2017 = 51.4; 2018 = 52.8; 2019 = 54.6; 2020 = 62.7; 2021 = 63.9; 2022 = 66.4; 2023 = 69.4; 2024 = 71.8; 2025 = 72.6; 2026 = 74.6 - NFPS gross debt: 2017 = 85.6; 2018 = 87.7; 2019 = 98.9; 2020 = 91.6; 2021 = 90.9; 2022 = 91.7; 2023 = 92.0; 2024 = 92.1 - Current account (billions of U.S. dollars): 2017 trade balance = 57.3; 2018 = 43.4; 2019 = 26.5; 2020 = 32.4; 2021 = 76.1; projected 2022 = 63.4; 2023 = 55.9; 2024 = 49.7; 2025 = 50.0; 2026 = 50.8 - Exports (billions of U.S. dollars): 2017 = 218.0; 2018 = 239.5; 2019 = 225.8; 2020 = 210.7; 2021 = 281.2; 2022 = 280.4; 2023 = 279.9; 2024 = 283.6; 2025 = 294.0; 2026 = 304.4 - Imports (billions of U.S. dollars): 2017 = 160.7; 2018 = 196.1; 2019 = 199.3; 2020 = 178.3; 2021 = 205.2; 2022 = 217.0; 2023 = 224.1; 2024 = 234.0; 2025 = 244.0; 2026 = 253.6 - Foreign direct investment (net inflows, billions of U.S. dollars): 2017 = 47.5; 2018 = 46.4; 2019 = 48.1; 2020 = 57.9; 2021 = 64.8; 2022 = 69.5; 2023 = 72.8; 2024 = 75.9 - Total external debt (percent of GDP): 2017 = 32.3; 2018 = 34.7; 2019 = 36.0; 2020 = 44.3; 2021 = 37.7; 2022 = 31.8; 2023 = 29.3; 2024 = 27.5; 2025 = 26.3; 2026 = 25.8 ### Key challenges and risks - Inflation pressures from currency depreciation and a surge in commodity prices have increased headline inflation and inflation expectations while output gap remains negative. - Labor market lags recovery in output; unemployment remains high, especially among youths, women, and afro-Brazilians. - Social safety net concerns: emergency cash transfers will eventually expire; absent permanent strengthening of the safety net, poverty and inequality could worsen. - Fiscal risks: near-term fiscal risks are low, but high public debt poses medium-term risks and requires rebuilding buffers. - Uncertainty around the outlook is exceptionally high; risks to growth viewed as broadly balanced. ### Executive Board assessment and policy recommendations - Directors commended decisive policy response to COVID-19 that reduced the severity of the 2020 recession and cushioned impact on the poor and vulnerable. - Fiscal policy guidance: - Focus on rebuilding buffers and reducing budget rigidities to create space for public investment and a stronger social safety net. - Continued adherence to the expenditure ceiling is necessary to reduce public debt. - Comprehensive tax reform should aim to increase progressivity, simplify the system, and improve resource allocation. - Tax reform should include a bold plan to scale back tax expenditures to frontload the benefits to equity and efficiency. - Adopt a more robust medium-term fiscal framework and strengthen subnational finances to enhance fiscal credibility and reduce fiscal risks. - Monetary and exchange rate policy: - Support for ongoing steady tightening of monetary policy to address rising inflation and keep inflation expectations well-anchored. - Monetary policy should remain data dependent, complemented with proactive communication and clear forward guidance. - Directors welcomed commitment to a flexible exchange rate and limiting intervention to countering disorderly market conditions. - Financial sector: - Banking system noted as resilient and supportive of recovery. - Gradual phasing out of crisis-related financial support is appropriate. - Endorsement of efforts to enhance financial inclusion and promote competition in the banking system. - Structural and supply-side reforms: - Welcome for ambitious supply-side reform agenda to boost productivity, potential growth, and living standards. - Need for concerted action to liberalize foreign trade and product markets, increase formal labor market flexibility, and improve governance. - Strengthen effectiveness and predictability of anti-corruption and AML/CFT frameworks. - Further steps needed to improve the environment for private sector investment. - Climate-related policies: - Directors welcomed initiatives to foster environmentally sustainable activities in response to climate-related risks. - Encouragement for closer collaboration between authorities and IMF staff to analyze climate-related risks in macroeconomic and financial stability assessments. ### Selected social and demographic indicators (as reported) - Area (thousands of sq. km): 8,510 - Agricultural land (percent of land area): 30.2 - Population Total (million) (est., 2019): 210.1 - Annual rate of growth (percent, 2018): 0.8 - Density (per sq. km.) (2019): 25.3 - Life expectancy at birth (years): 76 - Infant mortality (per thousand live births): 12 - Access to safe water (2018): 83.6 - Physician per 1000 people (2018): 2.2 - Hospital beds per 1000 people (2018): (value provided in table header but not specified) - Net enrollment rates, percent in: Primary education (2019) = 98; Secondary education (2019) = 85 - Adult illiteracy rate (2019): 6.6 - Unemployment rate (2019): 11.9 - Poverty rate (in percent, 2018) 1/: (computed by IBGE using World Bank threshold U$5.5/day) - GDP, local currency (2020): R$7,448 billion - GDP, dollars (2020): US$1,445 billion - GDP per capita (2020): US$6,875 - Gini coefficient (2018): 53.9 - Income distribution (2017) — Ratio between average income of top 10 percent of earners over bottom 40 percent: 12.4 - Main export products: airplanes, metallurgical products, soybeans, automobiles, electronic products, iron ore, coffee, and oil. *Press Release No. 21/274, September 22, 2021, IMF Communications Department.* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19) - [Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19) - [Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker) - [Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19) - [Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [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](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/09/22/pr21274-brazil-imf-executive-board-concludes-2021-article-iv-consultation-with-brazil_