International Monetary Fund. Western Hemisphere Dept.
This 2014 Article IV Consultation highlights that Brazil’s growth has decelerated in recent years. The boost from decade-old reforms, expanding labor income, and favorable external conditions, which enabled consumption and credit-led growth and underpinned sustained poverty reduction, has lost steam. Investment has been sluggish, reflecting eroding competitiveness, a worsening business environment, and lower commodity prices. The IMF staff projects negative output growth of 1 percent in 2015, with some drag from tighter fiscal and monetary policies and from the cuts in investment by Petrobras, adding to the downward momentum in activity carried over from 2014.
As the COVID-19 crisis continues to unfold, uncertainty remains exceptionally high. The Fund has provided extraordinary financial support as well as timely analysis and policy advice during the first phase of the crisis, but additional efforts are needed to help members secure a durable exit, minimize long-term scarring, and build a more sustainable and resilient economy. Against this backdrop, and in line with the strategic directions laid out in the Fall 2020 Global Policy Agenda and the International Monetary and Financial Committee (IMFC) Communiqué, this Work Program puts forward a prioritized Board agenda for December 2020 to June 2021, focused on activities of most critical importance to our members.
1. Policymakers can face difficult tradeoffs in managing large and volatile capital flows when confronted with financial and real shocks while pursuing their stabilization objectives. The benefits of capital flows are broadly recognized, but their volatility presents significant challenges. Capital flows to emerging market and developing economies (EMDEs) have exhibited large swings in the last two decades (Figure 1). Several periods of sustained inflows—in many cases driven at least in part by easy monetary conditions in major advanced economies (AEs)—have been interrupted by sharp reversals. Flows to commodity exporters have also been influenced by gyrations in commodity prices. Changes in global financial conditions—and attendant swings in capital flows—present particular challenges for many EMDEs, engendering difficult tradeoffs for monetary policy stemming from relatively shallow markets,1 external borrowing constraints, and other vulnerabilities. Advanced economies are not necessarily immune to these shocks either.