Over the last few years, Brazil's growth has significantly decelerated. Accompanying this slowdown, a change in commentary on Brazil's economic future has emerged, and is reflected in a recent ratings downgrade of Brazilian sovereign paper and an overall much-bleaker growth outlook both for the near and medium term. This note examines three contributing factors to this change in sentiment: macroeconomic management, the external environment, and microeconomic fundamentals. Among these, this note argues that the relative lack of progress on the microeconomic reform agenda has been far more detrimental to the growth outlook than either the credibility cost of recent macroeconomic management or the negative influence of a less supportive external environment. Against this backdrop, the recent ratings downgrade is not inherently negative: while Brazil is not about to slide down a slippery slope of macroeconomic mismanagement or on the verge of an externally powered economic meltdown, the downgrade can serve as a call to action for government to enact the necessary structural reforms to energize and sustain productivity growth.
Details
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Author
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Document Date
2014/06/01
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Document Type
Brief
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Report Number
88848
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2014/06/19
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Disclosure Status
Disclosed
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Doc Name
Three perspectives on Brazilian growth pessimism
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Keywords
Poverty Reduction & Economic Management;external environment;global financial crisis;Macroeconomic Management;capital accumulation;Central Bank of Brazil;Growth and Shared Prosperity;inflation;primary surplus;human capital;target range;administered price;productivity growth;macro instability;inflation targeting;reform effort;macroeconomic mismanagement;market forecasts;human capital accumulation;terms of trade;global interest rates;return to investment;macroeconomic policy framework;per capita income;exchange rate volatility;share of export;return to education;difficult external environment;years of schooling;
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Citation
Canuto,Otaviano Schellekens,Philip
Three perspectives on Brazilian growth pessimism (English). Economic premise,no. 148 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/900891468015591830/Three-perspectives-on-Brazilian-growth-pessimism