NEW YORK, Sept 22 (Reuters) - The International Monetary Fund said on Wednesday Brazil's economic performance has been better than expected "in part due to the authorities' forceful policy response" as the economy emerges from the pandemic slowdown.
The Fund expects Latin America's largest economy to grow 5.3% in 2021, unchanged from its July forecast.
"Uncertainty around the outlook is exceptionally high but risks to growth are viewed as being broadly balanced," the Fund said in the conclusion of its Article IV consultations, bilateral discussions held between the Fund and its members usually every year.
However, the IMF said, the pandemic has exacerbated long-standing challenges to higher growth and socio-economic inclusion.
"The labor market is lagging the recovery in output, and the unemployment rate is high, especially among youths, women, and Afro-Brazilians," the IMF said.
To that extent the South American country needs further policy efforts to boost market confidence and strengthen the medium-term outlook.
The Fund pointed to specific policy needs in terms of increasing formal labor market flexibility and improving governance, as well as strengthening anti-corruption frameworks.
"Steps are also needed to further improve the environment for private sector investment," said the Fund.
The IMF board was supportive of the recently hawkish monetary policy of Brazil's central bank as it aims to anchor inflation expectations. Inflation in Brazil is the third-highest among G20 countries, behind Argentina and Turkey.
The IMF said the central bank expects inflation to fall steadily from this year's highs and to reach its target range midpoint of 3.5% by the end of next year.
Later on Wednesday, the bank's rate-setting committee is expected to hike rates for a fifth consecutive meeting.
(Reporting by Rodrigo Campos, additional reporting by Andrea Shalal and Jamie McGeever; Editing by Chris Reese and Steve Orlofsky)
