AO PAULO – Brazil's economy will expand at a faster pace in 2012 than the disappointing 2.7% expansion registered in 2011, primarily because of interest rate cuts and fiscal measures aimed at fueling activity in Latin America's largest economy, said Itau Unibanco chief economist Ilan Goldfajn.
Speaking at an event in Sao Paulo hosted by the bank, Goldfajn said that Brazil's economy should grow 3.5% in 2012 and surge to 5.1% growth in 2013.
"Brazil has the conditions to grow at 4% per year without generating inflationary pressures," Goldfajn told more than 300 analysts and economists gathered at the event.
Brazil's government and the country's central bank have been aggressive in trying to counter a global economic slowdown and fallout from Europe's ongoing debt crisis.
In recent months, the central bank's policy dilemma has shifted from concerns about inflation toward concerns about growth.
Since August, the bank has slashed the benchmark Selic base interest rate to 9.75%. Earlier this week, the government introduced measures aimed at lifting Brazilian industry out of its months-long slump, including extensions to tax cuts on domestic appliances and other high-ticket items.
Despite a weak start to 2012, economic activity in Brazil is expected to recover during the year because of the government's moves and falling interest rates, Goldfajn said.
An improved worldwide scenario will help, with the global economy starting the year off on better footing than where it ended 2011, Goldfajn added. "Latin America is better positioned" to benefit from the improving scenario, the economist said.
The Brazilian Central Bank will likely cut the Selic to 9% by the end of 2012, Goldfajn said. Despite the interest rate cuts, inflation should fall back to 5.5% in 2012 after ending 2011 at the 6.5% ceiling of the central bank's target range of 4.5% plus or minus two percentage points.
In 2013, however, inflation will likely tick higher to 5.7% and force the central bank to raise interest rates to 10.5%, Goldfajn said.
One of the key barriers to Brazil's economic strength continues to be infrastructure, Goldfajn said.
"We have bottlenecks in infrastructure that limit potential growth, but there is a will to invest in these areas," Goldfajn said. "The question is how to obtain funding for [these investments]."
Meanwhile, Goldfajn warned that commodities prices may have more room to run despite analysts calls for them to fall. "Our vision with relation to commodities prices is relatively benign," Goldfajn said.
"We think that there will be a time when commodities prices are going to fall, but that time is not now. There is still demand and space for commodities prices to rise."
foxbusiness.com
Speaking at an event in Sao Paulo hosted by the bank, Goldfajn said that Brazil's economy should grow 3.5% in 2012 and surge to 5.1% growth in 2013.
"Brazil has the conditions to grow at 4% per year without generating inflationary pressures," Goldfajn told more than 300 analysts and economists gathered at the event.
Brazil's government and the country's central bank have been aggressive in trying to counter a global economic slowdown and fallout from Europe's ongoing debt crisis.
In recent months, the central bank's policy dilemma has shifted from concerns about inflation toward concerns about growth.
Since August, the bank has slashed the benchmark Selic base interest rate to 9.75%. Earlier this week, the government introduced measures aimed at lifting Brazilian industry out of its months-long slump, including extensions to tax cuts on domestic appliances and other high-ticket items.
Despite a weak start to 2012, economic activity in Brazil is expected to recover during the year because of the government's moves and falling interest rates, Goldfajn said.
An improved worldwide scenario will help, with the global economy starting the year off on better footing than where it ended 2011, Goldfajn added. "Latin America is better positioned" to benefit from the improving scenario, the economist said.
The Brazilian Central Bank will likely cut the Selic to 9% by the end of 2012, Goldfajn said. Despite the interest rate cuts, inflation should fall back to 5.5% in 2012 after ending 2011 at the 6.5% ceiling of the central bank's target range of 4.5% plus or minus two percentage points.
In 2013, however, inflation will likely tick higher to 5.7% and force the central bank to raise interest rates to 10.5%, Goldfajn said.
One of the key barriers to Brazil's economic strength continues to be infrastructure, Goldfajn said.
"We have bottlenecks in infrastructure that limit potential growth, but there is a will to invest in these areas," Goldfajn said. "The question is how to obtain funding for [these investments]."
Meanwhile, Goldfajn warned that commodities prices may have more room to run despite analysts calls for them to fall. "Our vision with relation to commodities prices is relatively benign," Goldfajn said.
"We think that there will be a time when commodities prices are going to fall, but that time is not now. There is still demand and space for commodities prices to rise."
foxbusiness.com
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