Brazil To Weather Global Downturn, See Growth In 2010 -IMF
Wed, Apr 22 2009, 15:04 GMT
djnewswires.com
Brazil To Weather Global Downturn, See Growth In 2010 -IMF
SAO PAULO (Dow Jones)--Brazil's economy will fare a bit better than originally expected during the current global crisis and return to growth by next year, according to the International Monetary Fund's World Economic Outlook, released Wednesday.
The report showed Brazil's gross domestic product declining by only 1.3% this year compared to an expected decline of 3.3% in the fund's January report. Moreover, Brazil's GDP is expected to be up 2.2% next year compared to the previous forecast of a 1.3% contraction. Growth in 2008 was a robust 5.1%.
The IMF said that generally low foreign debt, government stimulus, and considerable room to move on the monetary front by lowering interest rates have provided Brazil with some wiggle room as the economic crisis plays itself out.
The government recently decided to lower its primary budget surplus target to 2.5% of GDP from 3.5% in order to create conditions to stimulate the economy. The government has also been giving major manufacturers, from auto makers to 'white-line' home goods manufacturers, temporary tax exemptions. The move has helped draw out consumers.
Meanwhile, the Brazilian Central Bank has cut its Selic base rate 2.5 percentage points since the beginning of the year to its current 11.25%, with more cuts likely through the end of the year.
As a result, inflation is forecast to be marginally higher than the government's target of 4.5% in 2008. The IMF has inflation at 4.8% this year, but then declining to 4.0% in 2010. Inflation was a worrisome 5.7% in 2008.
It forecast the country's current account balance will hold steady at negative 1.8% of GDP in 2009 and again in 2010. Brazilian exports have been hurt by comparatively low international commodities prices. But the country is largely protected from a balance-of-payments crisis by foreign reserves of more than $200 billion.
On the domestic front, the IMF said Brazil has been able to avoid a full-blown credit crunch by government steps to provide liquidity to corporations. For instance, the government-controlled Banco do Brasil has provided billions in loans to auto makers and low interest car loans for consumers. The National Development Bank, or BNDES, has done the same for major industrial companies either for acquisitions or construction of large hydroelectric power plants and other projects.
-By Kenneth Rapoza, Dow Jones Newswires, 5511-2847-4541, kenneth.rapoza@dowjones.com |
