Wednesday, March 19, 2014

The Brazilian economy is set to continue to grow at a slow pace in the next few years, Alejandro Werner, theIMF’s western hemisphere department director, told a seminar held in the Chilean capital Santiago and organized by local investment firm EuroAmerica.

Brazil was growing at an average rate of approximately 4.5% during 2003-10, but growth has stalled in the last few years and the economy is now expanding at only around 2%, Werner said.

The high growth of the past years was driven by strong exports and a consumption boom, which in turn was fueled by strong formal sector job creation, real term wage increases and rapid credit expansion, added Werner.

At only around 19% of GDP, the main problem for the country is its low level of investment, especially private sector investment, he said.

Investment in Brazil would have to increase to a level that is substantially higher than 20% of GDP to experience growth rates of 3.5-4%, but Werner does not see this as likely to happen in the next few years.

There is set to be a positive impact on the economy in 2015-16 from planned public investment programs, but it will not be enough to boost Brazil’s GDP growth in a significant way, he said.