A combination of falling interest and inflation rates and a boost in consumer and business confidence is signalling that the Brazilian economy, one of the worst faring in BRICS for the past four years, is finally turning a corner.
Brazilian President Michel Temer, who promised economic improvements when he took over the presidency in 2016, praised Brazil’s growing industrial output and the positive performance of the stock market during a speech on Tuesday.
One of the critical challenges was how to lower rampant inflation. The Brazilian Central Bank has always maintained that a 4.5 inflation rate is ideal for growth.
In recent months, the rate fell from over 9 per cent to 2.46 per cent.
This may indicate that the Central Bank will have to cut interest rates again – it cut rates by 100 basis points just last week. Since March, it has cut rates from over 14 per cent to 8.25 per cent.
“I just want to say, if I may… To stop and compare. And I want, while we stop and compare, to show to you a little, after hearing that we have just left a very strong recession, how we have made progress in these 16, 17 months of government,” Temer said, according to an official government transcript.
In April, the International Monetary Fund said Brazil had the potential for the economy to move toward a more robust recovery.
At the time, it revised its 2018 GDP growth from 1.5 to 1.7 per cent.
But on the back of the recent economic indicators, Finance Minister Henrique Meirelles said that GDP growth could reach as high as 3 per cent as early as Q1 2018.
The economy had contracted a total of 8 per cent since 2014.
This would mark an economic coup for Temer, who has faced criticism for his draconian measures as well as a slew of corruption charges since he took office just a year ago.
The BRICS Post with inputs from Agencies