Brazil Primed to Enter 2018 with Economic Growth
Brazil’s scandal-rocked political scene has been rivaled only by its flailing economy, which has seen its worst recession in decades in 2015-2016. After eight consecutive quarters of recession, 2017 has proven that Brazil is capable of recovery. The last quarter has marked three consecutive months of growth.
While the numbers are certainly not anything off the charts, the turnaround is a welcome relief from the economic tailspin that sent inflation rates soaring and saw several of the country’s top businesses file for bankruptcy. GDP grew 0.1 percent over the last quarter of 2017 and 1.4 percent from last year. While these are modest numbers, Finance Minister Henrique Meirelles confirms that growth is expected to increase in 2018 with a projected expansion of 2.6 percent (as compared to 3.6 percent contraction in 2016 and 3.8 percent in 2015).
Though public debt is at an all-time high, interest rates are at their lowest in years, providing an incentive for investment.
President Michel Temer has made financial growth the focus of his presidency, embracing several policies and reforms to reverse the negative economic trends left in the wake of his predecessor, Dilma Rousseff. Among them: cutting back on bureaucracy and red tape to foster a more favorable environment for foreign investors; legalizing assets that Brazilians hold abroad to inject more cash into the economy; and introducing a plan to reform the country’s bloated pension system.
The pension system reform alone would add 0.3 percent to the projected growth estimate in 2018. However, the reform is controversial and unpopular and would adversely affect government workers and officials who are unlikely to vote in favor of it.
So, while much needed growth is on the horizon for 2018, one should not expect to see immediate or significant improvements. But for Brazil’s struggling economy, any positive uptick is a reason to celebrate the new year.