Brazil's government lowered its estimate for economic growth in 2017 but forecast a stronger recovery next year, a revision likely to lead to budget freezes and tax hikes as the country emerges from its worst recession on record. The Finance Ministry lowered its growth estimate for 2017 to 0.5 percent from 1.0 percent and forecast an expansion of 2.5 percent in 2018, according to a statement. The estimates are in line with the consensus view of about 100 economists who the central bank polls weekly.
The government also lowered its 2017 inflation forecast to 4.3 percent from 4.7 percent, below its 4.5 percent target. It said it expected inflation to end 2018 at 4.5 percent. The ministry is expected to announce spending freezes of 30 billion reais to 35 billion reais ($9.7 billion to $11.31 billion) and tax increases later on Wednesday as it tries to meet its 2017 budget deficit target.
Brazil's primary budget deficit target for this year is 139 billion reais, but the country's two-year recession has shrunk revenue. Finance Minister Henrique Meirelles has reiterated in recent days that the government was unwilling to raise taxes but would do so if necessary.
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