Brazil's Economic Growth Rate Expected to Hit Worst Since 1994 Next Year

Central Bank Governor: "Next Year's Economic Growth Forecast Can Be Lowered to the Private Sector's Expected Level"

President Jair Bolsonaro of Brazil [Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] Major Brazilian media reported on the 30th of last month (local time) that Brazil's economic growth rate for next year is expected to record the worst performance since 1994.

In a survey by the Brazilian daily Folha de S.Paulo, economic experts predicted that the next president could face the worst crisis phase since the introduction of the 'Real Plan' in 1994. The Real Plan was introduced amid an annual inflation rate reaching thousands of percent and involved adopting the Real as a new currency based on a fixed exchange rate system pegged 1:1 to the US dollar.

The Brazilian Ministry of Economy lowered this year's economic growth forecast from 5.3% to 5.1% and next year's forecast from 2.5% to 2.1% on the 18th of last month. However, the market expects this year's economic growth to be only 4.88%, with a possible drop to 0.93% next year.

Roberto Campos Neto, Governor of the Central Bank of Brazil, stated on the 30th of last month that the Central Bank would release a new lower economic growth forecast for next year within two weeks, possibly adjusting it down to the level currently expected by private institutions, which is 2.1% or lower.

Economic experts anticipate that due to continued growth slowdown, Real depreciation, rising inflation, and increasing public debt, the next government will face significant difficulties in managing economic policies regardless of who wins the presidential election in October next year.

Brazil's inflation rate last month was recorded at 10.25%. This is the first time in five years and six months since February 2016 (10.36%) that inflation has reached double digits. Inflationary pressures are expected to continue into next year.

The exchange rate between the US dollar and the Brazilian Real was around 5.1 Reais per dollar at the beginning of this year but is currently trading near 5.6 Reais per dollar.

The worsening employment environment, with an unemployment rate reaching 13%, and the fact that the extremely poor make up 13% of the total population, exacerbating the wealth gap, are also expected to weigh heavily on the next president's shoulders.

Earlier, another influential daily, Estado de S.Paulo, cited election experts' views that while corruption was the biggest issue in the 2018 presidential election, the economy is expected to be the most important issue in next year's election.

In the 2018 presidential election, outsider Jair Bolsonaro won by creating a 'far-right surge.' At that time, fatigue with the left-wing government that had lasted more than 13 years and ongoing investigations into power-related corruption since 2014 helped Bolsonaro create this surge.

However, President Bolsonaro is also not free from chronic corruption allegations, and dissatisfaction with his autocratic governance style is growing. Moreover, his economic performance has fallen far short of expectations, leading to cautious forecasts that his re-election in next year's presidential election will be difficult. Recent polls show left-wing former President Luiz In?cio Lula da Silva leading relatively comfortably.

This content was produced with the assistance of AI translation services.