Brazil should end 2022 with growth of 0.8%, inflation of 8.2% and unemployment in the range of 13.7%, according to an IMF (International Monetary Fund) report released this Tuesday (19).
The World Economic Outlook study is released every six months. The current growth projection for Brazil is almost half of that disclosed in the last balance sheet, of October 2021. At the time, the IMF predicted that the country would grow 1.5% in 2022.
The latest edition of the Focus bulletin, published by the Central Bank at the end of March and which sums up the expectations of the Brazilian market, pointed to a growth forecast of 0.5% of GDP. In February, Brazil had an unemployment rate of 11.2%. In March, inflation in 12 months reached 11.3%, according to IPCA data.
The IMF downgraded its growth forecast for the global economy from 6.1% to 3.6% compared to the previous report. Almost all the countries analyzed had a worsening of perspectives, due to the War in Ukraine.
Russia, which started the conflict and has been targeted by international sanctions, is expected to see its economy shrink by 8.5% this year amid annual inflation of 21.3%, the Fund predicts.
The economic effects of the war, which began in February, spread in waves to other countries, like an earthquake, the institute compares. “As Russia is a major supplier of oil, gas and metals and, along with Russia, of wheat and corn, the drop in the supply of these commodities has already sharply raised prices”, the report points out. “Rising food and fuel prices will affect low-income households globally.”
In 2022, inflation is expected to be around 5.7% per year in advanced economies and 8.7% in emerging and developing countries. For Brazil, the IMF forecasts a rise of 8.2% in prices this year and 5.1% in 2023. “Brazil responded to high inflation with an increase in interest rates, which will weigh on domestic demand”, comments the Background in the report.
The IMF also considers that the war has reduced investors’ appetite for risk and increased interest in markets considered more stable. And it predicts that global employment and production levels should return to pre-pandemic levels only in 2026.
Another obstacle to the recovery of the global economy is the lockdowns in China, adopted to contain Covid outbreaks, such as the one that paralyzed Shanghai. They can generate new problems in international supply chains.
Thus, the shortages of products could extend until the beginning of 2023, projects the IMF. “As a result, inflation is now projected to remain high for much longer than our previous projection, both in advanced economies and emerging or developing markets,” the study said.
As a result, there is a risk that inflation expectations will run out of control, generating a cycle that could lead central banks to respond more aggressively, predicts the IMF. “In the coming months, interest rates are expected to rise further,” the document points out.
The institute recommends that central banks act more quickly and accurately, so that actions against price increases are effective and generate less damage to the economic recovery.
China is an exception in terms of inflation: the rise in prices there is expected to be 2.1% a year, while historic highs are recorded in many parts of the world. China’s GDP growth forecast dropped from 8% to 4.4% compared to the previous IMF report. The slowdown in China’s growth also worsens prospects for Brazil, as the country is the largest destination for Brazilian exports.
Other Brics also had worse GDP forecasts. India is expected to grow 8.2% (previously 9.5%) and South Africa 1.9% (previously 5%).
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