Having slowed in 2014 and 2015 because of the drop in commodity prices and political instability, growth picked up in 2016. In 2017, the recovery will continue, driven by a resumption of investment (blocked during the democratic transition) especially in the mining sector, with increased gold production and higher cotton prices. After a record output of 40 tons of gold in 2016, production is projected to increase further in 2017, as the start of operations at new mines in 2016 and 2017 are expected to increase production. Moreover, reform of the mining code and stabilization of the political situation are expected to favor an acceleration in FDI flows. After three years of substantial decline, the price of gold recovered in 2016 and is expected to stabilize in 2017, such that it is able to maintain the contribution of the gold sector to growth. Likewise, the slight recovery in the price of cotton, the second most important source of export income, and a 2016/2017 harvest which promises greater yields, will help boost the acceleration in growth. Cotton production is projected to increase despite the decision within the industry, dissatisfied with the quality of the fiber, to abandon GMO cotton cultivation, which had reached 80% of the total crop during the 2014/2015 season. Higher private investment is expected to sustain private consumption, which should encourage job creation. Demographic trends and spending under the National Plan for Economic and Social Development (PNDES) 2016-2020 will also support growth. Nonetheless, the lack of infrastructure will still hamper activity, with the electricity supply, in particular, remaining an obstacle to more sustained growth.
Inflation, which is still sensitive to food price fluctuations, and accordingly to weather conditions, is likely to edge up in 2017, bolstered by the pick-up in private consumption.