IMF Says Brazil Needs Investment, Competitive Boost
The International Monetary Fund (IMF) Wednesday praised Brazil for producing prolonged macroeconomic stability.
But the IMF says Latin America's biggest economy must act more decisively on bolstering investment and increase competitiveness if it is to revive growth.
After posting strong growth at the end of the decade, Brazil slipped back relatively over the past two years.
Looking at the long term growth forecast, the IMF said in its annual assessment of a country whose government is trying to lift growth through tax breaks and other incentives.
The country also hopes for a massive boost to the economy when it hosts next summer's World Cup, which will bring in an an estimated 600,000 foreign tourists.
"Brazil could achieve long-run potential growth of about 3.5 percent, although this estimate is subject to significant uncertainty and assumes a sustained pick-up in infrastructure investment."
The IMF added Brazil had to strive to improve productivity, competitiveness and investment to lift growth above a 2013 forecast of just 2.5 percent -- though that followed on from an anemic 0.9 percent in 2012.
Against a backdrop of the global economic crisis, the IMF also worried about a potential propensity to import more, slowing growth short term.
While saluting "the expansion of the middle class (which) has been one of Brazil's success stories over the last decade ... a testament to macroeconomic stability and growth" the IMF lamented rising demand imbalances and lower saving.
"Consumption has become the dominant demand-side driver of growth while investment and net exports have weakened."
And the organization also warned against an overheating of mortgage debt, seeing "some risk" meriting continual vigilance.
The IMF praised Brazil's recent inflation record saying that "since 1999, price stability has been achieved and policy credibility has accumulated."
At the same time, "evidence is emerging, however, that this beneficial trend of falling persistence has recently stalled and may be reversing at the same time that medium-term inflation expectations have drifted above the central bank's target."
On interest rates, the IMF backed Brasilia's monetary policy in order to keep inflation largely in check -- though the 12 month figure came in at 5.86 percent in September. That missed an official central target of 4.5 percent although was under the government ceiling of 6.5 percent.
A recent slew of rises have taken the base rate to 9.5 percent, helping to dampen household debt although hitting consumption, a key motor in recent growth.
Source: Agence France Presse
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