Washington, May 19 (AFP) The International Monetary Fund is monitoring the developing political situation in Brazil, but “for now” is maintaining the forecast for a slight economic recovery this year, a fund official said today.

Beset by corruption charges, Brazil’s President Michel Temer yesterday defiantly refused to resign, but the investigation into his activities sparked a sharp downturn in the stock market which caused the Sao Paulo market to halt trading temporarily after a 10 per cent plunge.

“Obviously it’s too soon to assess the potential implications of events that are still ongoing,” IMF Western Hemisphere Department chief Alejandro Werner told reporters.

“For now we are maintaining our projection” of 0.2 per cent growth this year, Werner said in a briefing in Rio de Janeiro on the IMF’s semi-annual regional economic outlook.

However, the fund “will be monitoring the situation in the next few weeks to evaluate if we need to alter our projection”, he said, noting the increased volatility in financial markets.

The forecast for slight recovery comes after two years of recession in the huge South American economy, including a 3.6 per cent contraction last year and a 3.8 per cent downturn in 2015, the worst performance since 1948.

Just last month, IMF Managing Director Christine Lagarde praised Brazil for finally turning the corner, but the political turmoil could threaten that progress.

Temer, who himself came to office to replace impeached president Dilma Rousseff, is under investigation for allegedly authorising payment of hush money to a politician imprisoned for corruption.

One minister in his ruling centre-right coalition resigned, and there were some indications another might follow. (AFP)

This is published unedited from the PTI feed.