It was just couple weeks ago when when the IMF said it expected Brazil’s economic momentum to pick up in the next months as policies have been eased. But it has also issued some warnings.

IMF’s analysis showed that the main risks for Brazil arise from the prospect of lower commodity prices, the possibility of tighter external financial conditions, and a potential drop in demand from Europe, which is a major trading partner for Brazil.

In its recently released Financial System Stability Assessment on Brazil (full download below), the IMF wrote that the rapid credit growth, particularly to households, is creating “pockets of vulnerability that will need to be carefully monitored.”

Credit that has doubled as a percent of gross domestic product in the last decade has helped spur economic growth but is also showing signs of straining households, the IMF wrote below. In prime housing markets like Sao Paulo and Rio de Janeiro, prices have jumped as much as 30 percent annually in recent years.

“There is a risk that the financial system may become a victim of its own success.”

Full report below (source: IMF).
Imf Brazil FSSA

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