Worse international conditions alongside domestic disarray
The Central Bank long warned that the benefits of a favorable international situation were masking the damage caused by the absence of fiscal reforms, especially of the pension system. The fiscal reform efforts are stalled and now the international conditions have worsened, with the robust and synchronized growth of various countries no longer holding sway. The United States has surpassed the full employment point and the economy continues to grow faster than the potential, prompting the Fed to raise the interest rate, although less intensely than in other episodes of monetary normalization. But there are signs of slower growth in Europe, and the trade war begun by President Trump has added new uncertainties about global growth. The appreciation of the dollar and increased risks in emerging countries are two consequences of this new stage of the world economy. In the absence of profound fiscal reforms, the upward trajectory of Brazil’s public debt will be explosive, and due to the doubts about the results of the elections in October, it is impossible to divine the stance of the next government and hence the conditions for economic growth and inflation.
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