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Brazil: recovery prospects remain in place, despite weaker growth at the beginning of 2019
The Brazilian economy saw a clear slowdown at the end of 2018 and growth in economic activity for the year was only 1.1% — the same rate recorded in 2017. Last year the country continued to recover too slowly from the strong recession that knocked almost seven percentage points off Brazil's GDP between 2015 and 2016.
Growth recovery is slowing down in Brazil. The deceleration in the world economy, as well as slow and limited progress in the local adoption of economic reforms –particularly in the social security- will limit the economy’s capacity for growth in the coming years. We expect GDP to grow 1.8% in both 2019 and 2020.
The Brazilian economy will grow 2.2% in 2019 and 1.8% in 2020, stimulated by factors such as the expansive tone of monetary policy and the increase in confidence. However, prospects for growth recovery are now less positive, mainly due to the view that the global environment will be less favorable than previously expected.
Many individuals and households experience moments of financial difficulty, prompted either by a personal shock, such as losing a job, or an economy-wide shock, such as a recession. Financial resilience is key for consumer welfare and the formal financial system plays an important role.
The next government is expected to propose measures to tackle the fiscal imbroglio and other problems, but there are doubts about its capacity to implement reforms given the fragmentation of Congress and political polarization. All in all, the economy is likely to grow around 2% in the coming years.
The conservative Jair Bolsonaro has beaten the left-winger Fernando Haddad in the second round of the presidential elections held last Sunday 28 October. He will therefore be the Brazilian president during the period from 1 January 2019 to 31 December 2022.
The Brazilian economy will continue to recover slowly in the coming years. The gradual strengthening of domestic demand and the normalization of food prices will help to drive both inflation and interest rates upwards. The next government will likely take measures to reduce fiscal vulnerability, although it will hardly mana…