| Summary: | KEY ISSUES Context. Brazil is recovering gradually from the growth slowdown that started in mid-2011, but the recovery remains uneven and inflation elevated. Output is estimated atpotential with supply-side constraints, linked to tight labor market conditions andprotracted weak investment since 2011, limiting near term growth. A monetarytightening cycle has started, following a period of easing. In staff's view, excessive finetuning of fiscal policy (including through public banks) has weakened the credibility ofBrazil's long-standing fiscal framework, while broader policy uncertainty.
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