October 06, 20 - 11:49 am - Reuters

IMF improves forecast for Brazil’s GDP in 2020 and now estimates a 5.8% drop

The International Monetary Fund (IMF) on Monday improved its 2020 economic outlook for Brazil, but warned that risks remain “exceptionally high and multifaceted” and that government debt is on track to end the year at around 100 % of Gross Domestic Product (GDP).

The IMF now expects Latin America’s largest economy to shrink 5.8% this year, much less than the 9.1% contraction it had previously estimated, and forecasts a “partial” recovery and 2.8% growth in the next year.

In a document describing the preliminary conclusions of a recent team visit to Brazil, the IMF said that “significant” negative risks include a second wave of the pandemic, “long-term scars” from a long recession, and shocks in confidence due to to the country’s huge public debt.

Although the IMF welcomes the government’s commitment to reduce Brazil’s debt, the Fund warned that it may take time for jobs, income, and poverty to return to pre-pandemic levels.

People walk among street vendors and their goods in downtown Rio
People walk among street vendors and their goods in downtown Rio de Janeiro, Brazil. Photo: Reuters / Ricardo Moraes

“If health, economic and social conditions get worse than the authorities expect, they (government officials) must be prepared to provide additional fiscal support,” said the IMF, adding that the short-term policy priority is “saving lives and livelihoods.”

Translated by LABS