The global financial and economic crisis has not left Brazil unscathed. But a recovery is getting under way and should gather momentum in the second half of 2009 and into 2010. Continued macroeconomic consolidation – based on a sound policy framework combining inflation targeting, a flexible exchange rate and rules-based fiscal management – together with a much improved external liability position have underpinned the economy’s resilience. Policymakers should nevertheless not lose sight of longer-term challenges that will need to continue to be addressed to bolster the economy’s growth potential and to close the gap in living standards in relation to the OECD area at a faster pace.