After two years of economic recession, the Brazilian economy is finally showing signs of recovery amidst a continuous political crisis. Since officially taking office in August 2016, President Michel Temer has prioritized the implementation of a broad austerity package to include spending cuts and a series of reforms meant to stabilize Brazil’s fiscal position and promote greater economic growth.

As of October 2017, Brazil’s inflation rate is at a low 2.54% and is expected to close 2017 at 3.06%, while its interest (Selic) rate is currently at 7.5% and expected to drop to 7% by the end of 2017 as monetary easing continues. At the same time, the dollar has remained stable around R$3.16 – R$3.24, the commercial balance is positive, and the stock exchange has reached an all-time high of 76,000 points. Consumption has finally picked up again and unemployment has dropped from 13.7% in March 2017 to 12.6% in October. Due to these positive economic trends, Gross Domestic Product (GDP) is expected to grow 0.73% in 2017 and 2.5% in 2018.

While Brazil’s macroeconomic indicators are promising, especially compared to its 2015 numbers (inflation at 10.67%; Selic at 14.25%; dollar at R$3.91), they alone cannot mend the 7.2% drop in GDP from 2015-2016. In order for the Brazilian economy to return to long term sustainable growth and establish fiscal balance, the government must address a pension reform.

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