IMF Lauds Brazil Progress

The IMF welcomes signs that the Brazilian economy has started to improve and considered it to be in a favorable position to weather well the global crisis. In an executive board summary following a recent the Article IV consultation, the fund praises the Brazilian authorities’ robust policy framework and sound prudential supervision, which has allowed an appropriate and timely countercyclical policy response. “If the growth outlook were to deteriorate significantly from the authorities’ current projections, directors saw room for additional fiscal and monetary easing, subject to careful monitoring of market reaction,” says the IMF. The fund also endorses the authorities’ planned fiscal stimulus and reduction in the primary fiscal surplus target in 2009. “If revenues are less buoyant than projected, directors saw scope for further flexibility in the fiscal target through the use of the adjustor for public investment and resources from the sovereign wealth fund. They encouraged the authorities to contain other current expenditure, including wages, which will be difficult to reverse as the economy recovers,” adds the fund. It also stresses the importance of keeping public debt on a declining path over the medium term, and welcomes the authorities’ plans to return to a higher primary surplus in 2010 as the economy recovers.