World Bank raises Brazilian GDP growth projection to 1.7%

The World Bank revised Brazil’s GDP (Gross Domestic Product) growth estimate from 1.3% to 1.7% this year, and accelerated the forecast to 2.2% in 2025. According to the most recent Focus bulletin, released According to the Central Bank, the country’s economy is expected to grow 1.9% in 2024 and 2% the following year. The information is from the Folha de S. Paulo website.

In contrast, the World Bank cut its economic growth forecast for Latin America and the Caribbean in 2024 to 1.6%, compared to the previous estimate of 2.3%, stating that the region continues to lag behind growth rates. growth recorded in other parts of the world.

The region’s economic growth could receive a necessary boost from increased competition, but company diversification faces restrictions, including in education and infrastructure, the bank said in a report released on Wednesday (10).

The study highlights the importance of so-called “nearshoring”, the movement of bringing supply chains closer to their destinations, for the region’s economic results amid global tensions, citing a considerable reduction in FDI (foreign direct investment) in Latin America and the Caribbean since 2010.

In 2022, the region was the only one in the world to increase its FDI, according to the report. “Although it benefited most countries in the region, this increase was most notable in Brazil, which consolidated its position as the largest FDI destination, with an increase of almost 70% in 2022”, he says.

“Despite some encouraging increases in Central America and the Caribbean, in general, the nearshoring trend is largely bypassing the region. This points to the need for a broad set of indispensable reforms, as well as more aggressive recruitment of FDI opportunities by governments in the region.”

Low competition in the region is cited as a barrier to innovation and productivity, as large companies dominate several sectors, with 70% of workers in the region being self-employed or part of companies with fewer than 10 employees, the World Bank said. .

Even with the presence of competition agencies and laws in several countries, the bank said, enforcement in the region is fragile, as large and powerful companies generally influence government policies.

Another important barrier is education, as 29% of companies in the region say they cannot expand due to a lack of qualified labor, a problem that William Maloney, the bank’s chief economist for Latin America and the Caribbean, directly associates to the region’s poor public education and training systems, which are not prepared to meet the needs of the private sector.

“In Silicon Valley, we have this very close connection between companies and universities that is absolutely fundamental to the U.S. technological miracle of the last 50 years (or so),” Maloney said in an interview. “But Latin America is tied with Africa in terms of low levels of interaction between companies and universities.”

Maloney said this, coupled with very low levels of infrastructure investment, means “we have a lot of work to do on many fronts”.

A positive point in the region was macroeconomic management, which led to a rapid fall in inflation in most countries in the region, to the point where prices rose more slowly than in many developed countries.

“But nothing will happen if we don’t fix the underlying fundamentals, the low level of education, the bad infrastructure, the difficulty of transporting goods,” he said. “This will be a barrier to any type of industrial policy that one wants to consider.”

The study also mentions that Brazil was important in reducing general poverty levels in Latin America, along with Mexico, and that the region fully recovered the GDP lost during the pandemic. Furthermore, global employment is close to that seen in 2019, the report says.

The current growth rate in Latin America and the Caribbean is not enough to drive prosperity, the institution added.

“Persistent low growth is not just an economic statistic, it is a barrier to development,”

said Carlos Felipe Jaramillo, World Bank vice president for Latin America and the Caribbean, in a statement.

“This translates into reduced public services, fewer job opportunities, depressed wages and greater poverty and inequality.”

IMF

Global economic growth will be just 2.8% a year until 2030, a percentage point below the historical average, unless major reforms are made to increase productivity and leverage technologies such as artificial intelligence, the International Monetary Fund (IMF) said. ) also on Wednesday.

The Fund released a chapter from its upcoming “World Economic Outlook” report, which showed further declines in the average global growth rate, which has slowed since the 2008 global financial crisis.

“Without ambitious measures to increase productivity, global growth is expected to fall well below its historical average,”

said the IMF, warning that expectations of weak growth could discourage investment, deepening the slowdown.

According to the fund, the persistent low growth scenario, combined with high interest rates, could also restrict the ability of governments to combat the economic slowdown and invest in social welfare or environmental initiatives.

“All of this is exacerbated by strong obstacles arising from geoeconomic fragmentation and harmful unilateral trade and industrial policies”, states the IMF in an article that anticipates part of the report, to be released in full next Tuesday.

In its last report, a year ago, the IMF said it expected medium-term growth to be around 3%. The new forecast reflects downward revisions to growth across all income groups and regions, particularly in emerging market economies.

The IMF has called on countries to take urgent action to combat weakening growth prospects, warning that this worsens prospects for living standards and global poverty reduction.

“An entrenched low-growth environment, coupled with high interest rates, would threaten debt sustainability and could fuel social tension and hamper the green transition,”

he stated.

The IMF said a range of policies, including better allocation of capital and labor and addressing worker shortages in major economies with aging populations, could offer hope.

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