(Bloomberg) -- Brazil’s economy has missed expectations for two consecutive years, but investors and the government think it will be different this time.
The central bank on Thursday raised next year’s growth forecast to 2.2%, bringing it in line with expectations from economists it surveys. Yet the sense of deja-vu is undeniable: estimates also stood above 2% at the beginning of 2018 and 2019 only to disappoint later, with gross domestic product expanding little more than 1% each year.
This time, however, the expansion will be more sustainable because it’s increasingly driven by private investments, central bank chief Roberto Campos Neto said at the presentation of the revised forecasts.
Additional reforms following this year’s pension overhaul will add to the growth momentum, according to President Jair Bolsonaro’s Chief of Staff Onyx Lorenzoni.
“We’ve got our foot on the accelerator,” he said in an interview on Thursday.
Failure in spurring private investment amid global and domestic uncertainties was among the reasons for Brazil’s poor economic performance in recent years. The country also succumbed to domestic political crises and a massive truckers’ strike last year. This year’s expansion hasn’t taken off even after financial markets cheered Bolsonaro’s election win.
Controversial remarks by government members on topics including human rights and Amazon rainforest fires are another reason why Brazil isn’t growing more, according to lower house Speaker Rodrigo Maia. Such controversies are spooking foreign investors and holding back the economy, Maia told reporters on Thursday.
“When that happens, investors don’t put money in Brazil,” he said in reference to Bolsonaro’s comments. “The economy was supposed to grow 2.5% this year, but it’s going to end up growing 1%. For me, those remarks are to blame. And if they continue next year, the economy will grow less than 2.5%.”
In many ways, Brazil’s economy will enter 2020 better positioned than the year prior. The benchmark interest rate is at the lowest level in history while the central bank is pushing for reforms to improve the credit market.
“All of this forms part of the same plans to reinvent the economy with private sector money,” Campos Neto told reporters.
--With assistance from Rafael Mendes and Samy Adghirni.
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