Thursday, October 15, 2015

Brazil can avoid The Crisis

"Brazil isn't destined to have a crisis, it's possible to avoid it," Roubini said to Folha "If they make the necessary adjustments, there won't be any further downgrading and confidence in fiscal policy will improve. That will make people more comfortable about spending. The currency has devalued to the point of becoming more competitive, and exports should increase, though not by much, because of the global situation. Midway through next year, inflation should fall, because there will no longer be the effects of the increase of price controls and the recession will make the increase in salaries lower. The Central Bank will thus be able to cut interest rates and that will re-establish some growth. Brazilian GDP is likely to shrink 3% this year, perhaps as much as 4%. In 2016, if adjustments are made, I think there will be recession in the first six months, but the economy will bottom out midway through the year and then begin to recover. Brazil is not destined to have a crisis. There is a way out, although it is difficult and requires political courage from whoever is in power. For things to stabilize, fiscal adjustment is necessary, there's no other way," he added.

 Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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