Economic outlook, analysis and forecasts

Brazil - Economic forecast summary (November 2016)

 

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The economy is emerging from a severe and protracted recession. Political uncertainty has diminished, consumer and business confidence are rising and investment has strengthened. However, unemployment is projected to continue rising until 2017 and decline only gradually thereafter. Inflation will gradually return into the target range.


The fiscal stance is mildly contractionary over the projection period, which strikes an adequate balance between macroeconomic stability requirements and the need to restore the sustainability of public finances through a credible medium-term consolidation path. An effective fiscal adjustment would allow monetary policy to loosen further and support a recovery of investment. Raising productivity will depend on strengthening competition, including through lower trade barriers, fewer administrative burdens and improvements in infrastructure.


Public expenditures have been outgrowing GDP for many years and public debt has increased. A new fiscal rule is being implemented and, in combination with a planned reform of pensions and social benefits, it should strengthen fiscal sustainability. These reforms could simultaneously lead to stronger declines in income inequality. On the revenue side, there is substantial scope to reduce complexity and compliance costs, including by consolidating indirect taxes at the state and federal levels into one broad-based value added tax.

 

 

 

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Other information

Economic Survey of Brazil (survey page)

 

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