Brazil's return to economic growth hinges on austerity - IMF
By Alonso Soto
GOIANIA, Brazil (Reuters) - The Brazilian economy will likely shrink this year, but the South American country could return to positive growth in 2016 if it succeeds in its austerity drive to improve investors' confidence, the International Monetary Fund said on Friday.
The IMF lowered its 2015 growth estimate for Brazil to negative 1 percent from a positive 0.3 percent forecast in January due to tighter fiscal and monetary policies and less investment by state-run oil company Petrobras .
The international lender said the fiscal adjustment is crucial for Brazil to regain the trust of investors to bolster growth in the following years.
"Determined implementation of these measures should help restore confidence and foster a recovery in growth and investment in due course," the IMF said in a press release following consultations on Brazil's financial and economic status.
Faced with an imminent recession, President Dilma Rousseff has embarked on an aggressive drive to cut public spending and raise taxes in order to balance the government's overdrawn accounts.
Finance Minister Joaquim Levy told businessmen in the central Brazilian city of Goiania on Friday that the belt-tightening was needed to guarantee sustainable growth in the world's No. 7 economy.
To achieve its fiscal goal this year the Brazilian government would need "ambitious, front-loaded measures," the IMF said
The IMF welcomed the scale-down of Brazil's daily foreign exchange intervention programme and said its use should remain limited to allow for further depreciation of the local currency.
(Reporting by Alonso Soto and Anthony Boadle; Editing by Leslie Adler)
