IMF: Brazil Must Alter Strategy for Better Growth
Brazil must boost productivity and achieve a better balance between investment and consumption, the International Monetary Fund said in a report released Friday.
"Further efforts are needed to achieve a rebalancing of domestic demand from consumption to foster saving and provide space for investment," the IMF said in its Article IV report.
"This would lower interest rates and the exchange rate and support potential growth and stability," it added.
The report said that last year, "global shocks adversely affected confidence and trade, contributing to the sharp deceleration of economic activity in the second half of the year, and risks of further spillovers remain high."
Noting that "this complicates the challenge of calibrating domestic policy settings," it added that "it will be key to allow sufficient time for current policy easing to play out, while standing ready to take further action should downside risks materialize."
The report said that despite the recent depreciation of the real, which currently trades at around two to the dollar, the Brazilian currency "remains strong".
Banks are well positioned to deal with shocks and the financial system is well supervised, but the rapid growth of consumer credit, rising property prices and the expansion of banking credit require continued, prudent and careful vigilance.
The IMF also "welcomed recent steps to strengthen saving and competitiveness, including pension and tax reforms, but saw the need for further reforms to raise productivity."
"Public investment financed by fiscal saving and further capital market deepening will also be important," it said.
Last week, the IMF revised downward its growth prospects for Brazil in 2012, from 3.1 percent to 2.5 percent, in line with those of the Brazilian Central Bank. Brazilian market analysts meanwhile expect growth of 2.05 percent.
Last year, the Brazilian economy grew only 2.7 percent after a strong 7.5 percent in 2010.
Brazil, which in 2005 made an early repayment of the $15.5 billion it owed to the IMF, announced last month it planned to contribute an additional $10 billion to the IMF bail-out fund.
It acted in concert with other major powers which are collectively trying to secure greater influence in the Washington-based financial institution.
Source: Agence France Presse
| Copyright © 2012 Naharnet.com. All Rights Reserved. | https://mobile.naharnet.com/stories/en/47308 |