Brazil's Brasilia Post reported on January 25 that the International Monetary Fund (IMF) lowered its GDP growth forecast for 2022 and 2023 to 0.3 percent and 1.6 percent, respectively, from 1.5 percent and 2 percent, in its World Economic Outlook report released on Monday.

Of the 15 major economies whose growth forecasts have been revised, Brazil has seen the biggest cut and is the only country to see growth of less than 1% in 2022. The IMF forecasts that Latin America will grow by 2.4 percent in 2022, eight times faster than Brazil, while developing countries will grow by 4.8 percent in 2022. Brazil's disadvantage compared with other emerging economies is obvious.

The decline in Brazil's growth expectations is due to a strong monetary policy response to inflation, which puts pressure on domestic demand, the report said. Mexico has a similar story, but to a lesser extent. According to the IBGE data, the broad consumer Price Index (IPCA) rose by 10.06% in 2021, the highest since 2015, far exceeding the CMN's inflation target of 3.75%. In response, the Central bank of Brazil used monetary policy tools. In December, the Central bank raised its benchmark interest rate (Selic) to 9.25%, hoping to cool the consumer market and thus curb price increases and national economic activity.

Earlier, Brazilian Economy Minister Eduardo Guedes said the IMF's forecasts had lost credibility after it predicted a sharp 9% decline in 2020, when the economy actually contracted 4.1%.