After recession in 2015-2016 Brazil shows strong signs of recovery. The major problem of Brazil economy was high inflation that led to (1) decreased real consumption (coupled with high unemployment rate), (2) higher interest rate (for both households and government). Banco Central do Brazil was able to take prices under control and, thus, ensuring a healthy mix of falling inflation and lower interest rates. The result is economy growth due to (1) private consumption increasing, (2) unemployment decreasing, (3) export increasing. Nevertheless, budget deficit remains high and that creates risks. That is why I assume that next steps might be (1) limitation of government expenses, (2) privatization, (3) pension reform (particularly, unpopular measures such as raise the retirement age).
Brazil is going through real serious budget problems: aging of population with the trimming of social security spending. This is the main drawback for growth potentials of the country . Most people thinks the future election may help. I am skeptical to this. I would suggest to increase pension age and to invest heavily on to the sectors to replace imports.
The Brazilian government one month ago announced that GDP this year (2018 will grow faster and they wait recovery from the recession for the past 10 years. This is for optimists. I do not see real activity (as you know some big steps) to resolve structural problems in economy. Look, all they wants to do is to narrow a budget deficit by curtailing the social security system. This will not help. Obviously imho.
I expect that Brazil's economy will continue to recover from downfall in 2015-2016, as well as weak growth in 2017, and will show annual average real GDP growth at 2.6% in 2018-2022. Lower inflation and interest rates are supporting the growth of private consumption, given by stimulating retail sales and improving household and company balance sheets. However, the credit growth is weak, due to the banks haven't adapted to the sharp decline in the policy rate. In my view, by implementing fiscal reforms and pursuing a sensible policy, the next government could increase the investment, after falling by 25% in 2015-2016, and provide stable economic growth in 2018-2022. Therefore I have positive outlook for Brazil's economy.
Despite recent stabilization in Brazilian economy after recession in 2015-2016, I assume that this recovery will be short-lived. The thing is, budget deficit remains high and its reduction might lead to both growth lowering (due to reduction of government spending) and social instability (due to unpopular measures such as raise the retirement age). As a result, political crisis is quite possible and, if so, that will lead to second wave of recession