IMF improves Brazilian growth forecasts. But there are caveats

The International Monetary Fund (IMF) on Monday updated its global growth forecast.

A slowdown in headline inflation (which reduces some of the pressure on central banks to deliver the bitter pill of monetary tightening), a warm European winter (which reduced the severity of the continent’s energy crisis), and the end of China’s zero-Covid policy will allow for the world economy to grow by 2.9 percent in 2023 — 0.2 points above the previous October projection.

The outlook for Brazilian GDP growth improved by the same margin, from 1 to 1.2 percent. That is below the average forecast for emerging economies (4 percent) and Latin America (which stands at 1.8 percent).

“The forecast revision reflects upgrades of 0.2 percentage point for Brazil and 0.5 percentage point for Mexico due to unexpected domestic demand resilience, higher-than-expected growth in major trading partner economies, and in Brazil, greater-than-expected fiscal support,” the IMF said on Monday. 

“Growth in the region is projected to rise to 2.1 percent in 2024, although with a downward revision of 0.3 percentage point, reflecting tighter financial conditions, lower prices of exported commodities, and downward revisions to trading partner growth.”

The fund cites Brazil as one of the economies which “have completed their tightening cycle.” But while the Central Bank has kept benchmark interest rates stable at 13.75 percent in recent policy meetings, — and is expected to do the same in the next, on February 1 — the monetary authority has warned that it will not hesitate in bringing back the pain if the fiscal outlook is not positive.

• #iMF