MercoPress. South Atlantic News Agency

Speed of recovery, the main debate on the Brazilian economy

“I don’t know if you saw, but Brazil was one of the countries for which the IMF most intensely changed its growth forecast,” central bank chief Ilan Goldfajn said

Brazil's policy makers welcomed an upward revision of the country's growth by the International Monetary Fund, while downplaying the fact its estimate remains lower than others.

“I don’t know if you saw, but Brazil was one of the countries for which the IMF most intensely changed its growth forecast,” central bank chief Ilan Goldfajn told reporters on the sidelines of the IMF’s spring meeting in Washington.

“It’s possible there’s another adjustment next time. If our projections are maintained, I think it’s likely they end up raising it.”

The IMF increased its forecast for Brazil to 2.3% in 2018, according to its World Economic Outlook released this month, up from 1.9% previously. This despite the fact that many economists from the private sector believe it will be lower. A series of weak economic data have prompted Brazilian economists to cut their 2018 growth forecast for three straight weeks, to 2.76%.

While the central bank estimates Latin America’s largest economy will expand 2.6%, Finance Minister Eduardo Guardia expects 3%. He hasn’t yet found sufficient reason to lower the ministry’s outlook but he could do so in its next bi-monthly review, he told reporters in Washington.

“I haven’t looked into details of their number,” Guardia said of the multilateral fund’s projection. “Traditionally the IMF has more conservative forecasts than the market average, it’s a question of the parameters they used. I prefer to look at our number and the average of Brazilian analysts.”

In discussing the IMF’s revised forecast, both Guardia and Goldfajn stressed Brazil has emerged from a two-year recession that was its worst on record. Analysts no longer debate whether the economy is undergoing recovery, but rather its speed, Goldfajn said. He added that any outlook from 2.5% to 3% is “within the reasonable margin.”

The IMF’s forecast falls outside that range because it is more pessimistic about the prospect of upcoming presidential elections prompting some investors to delay projects, Alejandro Werner, director of the Western Hemisphere’s department, said in an interview. He agreed the trend is more significant than its exact path, particularly because projecting rebound after such deep recession is inherently imprecise.

“Measuring the effect of electoral uncertainty on investment is more an art than a science,” Werner said.

“I don’t claim that we have a crystal ball that is much better and much less opaque than Ilan’s crystal ball. I say both our crystal balls are relatively opaque, and we’re trying to do our best with that”.