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Home > Country Profiles > Brazil

Country Profiles

Financial Outlook

Brazil’s economy started to slow in mid-2011. Growth since then has been patchy, and in a recent country report (October 2013) the IMF indicated that it was less than enthused by the Brazilian government’s “excessive fine tuning of fiscal policy,” particularly since these efforts have not solved the twin issues of low savings in the country and low investment. However, the IMF expects the economy to improve through 2014, supported by increased investment and firm domestic demand. Real GDP growth stayed below 1% through 2012, while inflation remains above 4.5%. The Brazilian real’s real effective exchange rate depreciated by 9% through the 12 months to April 2013, but although this should have improved the country’s competitiveness in manufactured goods, rapid real wage growth and stagnant labor productivity have eroded the gains. According to the IMF, foreign purchases of Brazilian equities have also been subdued, reflecting a sense by international investors that the country’s GDP growth is weak and disappointing. However, foreign direct investment (FDI) continues to be strong, with flows directed to Brazil’s domestic services sector. Annual FDI flows averaged 2.5% of GDP between 2003 and 2012, and FDI is expected to play an important role in the development of infrastructure across the country over the next five years.

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Further reading on Brazil

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