Brazil’s Finance Minister Guido Mantega said growth in the world’s sixth biggest economy is picking up after a “weak” first quarter, reducing the need for additional stimulus measures.
The measures taken so far “would be enough, given the trend we are on and as long as the external situation doesn’t deteriorate,” Mantega said today in an interview in his Sao Paulo office.
“The economy grew little, was weak from January to March. April wasn’t great either. In May, we are feeling an improvement.”
Brazil’s economy, which shrank in the third quarter of 2011, has been recovering more slowly than anticipated even as the government steps up interest rate cuts and other measures to boost growth.
Economic activity contracted in each of the first three months of the year, surprising analysts who expected a rebound in March, according to central bank data.
Mantega, 63, said that the slump in the real, the worst- performing major currency in the past three months, is contributing to a revival in economic growth by slowing imports.
The central bank’s six consecutive interest rate reductions since August and tax cuts for companies will also help Latin America’s biggest economy expand at a 4.5 percent pace in the second half, he said.
The real dropped 15 percent in the past three months, after having rallied in the first two months of the year. The Brazilian currency fell 0.75 percent to 2.0238 per U.S. dollar today.
Weaker Real
Mantega said the weaker real isn’t a concern for the government and will have only a small impact on inflation, which has exceeded its 4.5 percent target since August 2010, even as it slows. Inflation, as measured by the benchmark index, decelerated to 5.1 percent in April, the slowest in 19 months.
“In the past six months the real has weakened and, therefore, the competitiveness of Brazilian industry is gradually improving,” Mantega said. Brazil’s seasonally-adjusted economic activity index, a proxy for gross domestic product, fell 0.35 percent in March, after dropping in January and February, the central bank said today.
The result was worse than predicted by all 18 economists in a Bloomberg survey, whose median forecast was for growth of 0.49 percent. The report prompted Banco Fator SA and Gradual Investimentos to cut growth forecasts for this year.
Tax Cuts
In April, President Dilma Rousseff ordered in April tax cuts and other stimulus measures worth about 65 billion reais as part of a plan to stimulate growth. The plan included an additional 45 billion reais for the state development bank to step up subsidized loans.
Banco Fator will reduce its 2012 growth estimate to less than 2.5 percent from 2.7 percent, Jose Francisco Goncalves, the bank’s chief economist, said in a telephone interview from Sao Paulo.
Andre Perfeito, chief economist at Sao Paulo-based Gradual Investimentos, cut his 2012 growth forecast to 2.3 percent, from 2.7 percent. A drop in industrial production is offsetting increases in retail sales and slowing the economy’s recovery.
Industrial output contracted in the first three months of the year on an annual basis, while retail sales rose in January, February and March.
The economy expanded 2.7 percent last year, its second worst performance since 2003 and less than Germany’s 3 percent and Sweden’s 4 percent. Mantega said that, while the country will grow less than his initial 4.5 percent forecast, expansion will be faster than in 2011.
bloomberg.com
The measures taken so far “would be enough, given the trend we are on and as long as the external situation doesn’t deteriorate,” Mantega said today in an interview in his Sao Paulo office.
“The economy grew little, was weak from January to March. April wasn’t great either. In May, we are feeling an improvement.”
Brazil’s economy, which shrank in the third quarter of 2011, has been recovering more slowly than anticipated even as the government steps up interest rate cuts and other measures to boost growth.
Economic activity contracted in each of the first three months of the year, surprising analysts who expected a rebound in March, according to central bank data.
Mantega, 63, said that the slump in the real, the worst- performing major currency in the past three months, is contributing to a revival in economic growth by slowing imports.
The central bank’s six consecutive interest rate reductions since August and tax cuts for companies will also help Latin America’s biggest economy expand at a 4.5 percent pace in the second half, he said.
The real dropped 15 percent in the past three months, after having rallied in the first two months of the year. The Brazilian currency fell 0.75 percent to 2.0238 per U.S. dollar today.
Weaker Real
Mantega said the weaker real isn’t a concern for the government and will have only a small impact on inflation, which has exceeded its 4.5 percent target since August 2010, even as it slows. Inflation, as measured by the benchmark index, decelerated to 5.1 percent in April, the slowest in 19 months.
“In the past six months the real has weakened and, therefore, the competitiveness of Brazilian industry is gradually improving,” Mantega said. Brazil’s seasonally-adjusted economic activity index, a proxy for gross domestic product, fell 0.35 percent in March, after dropping in January and February, the central bank said today.
The result was worse than predicted by all 18 economists in a Bloomberg survey, whose median forecast was for growth of 0.49 percent. The report prompted Banco Fator SA and Gradual Investimentos to cut growth forecasts for this year.
Tax Cuts
In April, President Dilma Rousseff ordered in April tax cuts and other stimulus measures worth about 65 billion reais as part of a plan to stimulate growth. The plan included an additional 45 billion reais for the state development bank to step up subsidized loans.
Banco Fator will reduce its 2012 growth estimate to less than 2.5 percent from 2.7 percent, Jose Francisco Goncalves, the bank’s chief economist, said in a telephone interview from Sao Paulo.
Andre Perfeito, chief economist at Sao Paulo-based Gradual Investimentos, cut his 2012 growth forecast to 2.3 percent, from 2.7 percent. A drop in industrial production is offsetting increases in retail sales and slowing the economy’s recovery.
Industrial output contracted in the first three months of the year on an annual basis, while retail sales rose in January, February and March.
The economy expanded 2.7 percent last year, its second worst performance since 2003 and less than Germany’s 3 percent and Sweden’s 4 percent. Mantega said that, while the country will grow less than his initial 4.5 percent forecast, expansion will be faster than in 2011.
bloomberg.com
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