Experts Lower Brazil’s GDP Growth Expectation to 1.91%

Brazil's real currencyThe economy of Brazil is expected to grow 1.91% this year. The forecast is part of a weekly consultation made by the Brazilian Central Bank (BC) with various financial institutions.

Last week, the forecast had been announced at 2%. For 2015, the expected growth in the Gross Domestic Product (GDP), sum of all goods and services produced in the country, dropped from 2.50% to 2.20%.

 

The International Monetary Fund (FMI), however, forecasts an increase by 2.3% in the Brazilian GDP this year, and by 2.8% in 2015, according to the latest World Economic Outlook update, released last week.

The industrial production estimates were maintained at 2.2% this year and adjusted from 2.89% to 2.95% for 2015.

Financial institutions’ forecasts for the public debt and GDP ratio continues at 34.8% in 2014, and 35% in 2015.

Still according to the BC research, the expected trade balance surplus (exports minus imports) dropped from US$ 9.1 billion to US$ 8 billion this year. For 2015, forecasts remain at US$ 12 billion.

On the other hand, the current transactions deficit (register of buying and selling transactions of goods and services between Brazil and abroad), was adjusted to from US$ 72.15 billion to US$ 73 billion in 2014, and from US$ 70.6 billion to US$ 71.45 billion in 2015. The dollar exchange rates continue at R$ 2.45 this year, and R$ 2.50 in 2015.

For 2014, Brazilian financial institutions forecasts on foreign direct investments (FDI) have dropped from US$ 60 billion to US$ 57.5 billion. In 2015, the forecast remains the same as before, at US$ 60 billion. In 2013, FDI in Brazil added up to more than US$ 64 billion.

Record Deficit

The current transactions deficit (purchases and sales of goods and services between Brazil and the rest of the world) of US$ 81.374 billion in 2013 is the greatest in the Brazilian Central Bank’s (BC) recorded history, started in 1947. The deficit represents 3.66% of the Gross Domestic Product (GDP), worst result since 2001 (4.19%). The information was released this Friday (24) by the BC.

According to the deputy head of the BC’s Economic Department, Fernando Rocha, the result was affected by the reduction of the trade balance surplus. In 2013, the trade surplus was of US$ 2.558 billion, result much lower than in 2012 (US$ 19.395 billion).

Rocha also mentioned the increase in Brazilian tourist spending in international travels, which was a record breaking US$ 25.342 billion in 2013. For him, the raise in Brazilians’ income contributed to the increase in travel expenses, even with the high dollar exchange rates.

Companies’ spending with equipment rental also contributed to the massive deficit, which added up to US$ 19.06 billion last year. Rocha said that the figure is “related to the increase in investments in the Brazilian economy.”

For 2014, Rocha believes that the current transactions deficit will be lower, due to a greater growth in the global economy, which will lead to an increase in the demand for Brazilian products.

On top of that, with the high dollar exchange rates, exports may increase even more. The BC’s forecast for the current transactions deficit this year is of US$ 78 billion, that is, 3.53% of the GDP.

Foreign direct investments (FDI) in Brazil were insufficient to finance the deficit in 2013. FDI totaled US$ 64.045 billion, which corresponds to 2.88% of the GDP. The result is lower than in 2012, when FDI reached US$ 65.272 billion (2.9% of the GDP).

Rocha declared, however, that the current transactions deficit “was mostly financed by foreign direct investments, which are long-term assets.”

Rousseff Woos Foreign Investors

Brazilian president Dilma Rousseff said the country offers plenty opportunities for business and that Brazil’s success in the coming years is closely tied to partnerships with foreign and domestic investors. She spoke at the World Economic Forum in Davos, Switzerland.

Rousseff emphasized that Brazil has always welcomed foreign investments. “Aspects of the recent conjuncture should not obscure reality. Brazil more than needs and more than welcomes partnerships with the domestic and foreign private sector,” she said.

She added that investments in infrastructure must face the challenge generated by decades of underinvestment, worsened by the increase in population demand in recent years.

The Brazilian president spoke about concessions. “The aim is to add resources, increase efficiency and perfect the management of services associated to these works. Private consortiums that are participating in the concessions are related to great national and international companies,” she declared, referring to the recent bids for roads, airports and the new regulatory framework of the Brazilian port system.

Dilma emphasized the importance of improving railways to help exports of mineral ores and grains. She noted that in 2014 there will be the first railway bid for the Midwestern region of Brazil.

In relation to urban mobility, the president mentioned investments worth US$ 62 billion in subways, monorails and light rail. “One of the greatest challenges is to create a modern network that is compatible with the continental size of the country,” she said.

About oil, Dilma said that the bid for the Libra Field, in the southeast coast of Brazil, in 2013, led to a turnover expectation of US$ 8 billion, a sum which will affect the entire oil and natural gas productive chain.

The issue of using oil royalties for education was also raised during her speech. “We will transform finite richness into perennial heritage for the population: education,” she declared.

When speaking about trade, the president said that it was time to overcome defensive disputes and acknowledge the sector’s role in economic recovery. “A new global economic growth cycle is beginning. As the crisis begins to fade away, a new outlook on emerging countries will take shape. With a long-term strategy focused on investments, education and productivity, we hope for an even better recovery of this international crisis.”

Dilma emphasized that the emerging economies, such as Brazil, are fundamental for global economic recovery. She believes it is premature to assert that these countries will lose strength with the end of the international crisis.

“We are speaking of countries with the greatest opportunities for investments and consumption increase. Countries that need diversified logistics infrastructure, social and urban infrastructure, energy, oil, gas, mineral ores, industrial and agricultural investments. We are societies going through a strong process of social changes, where new, dynamic markets are formed, internal markets formed by hundred millions and, in some cases, billion consumers,” she stated.

Before her, the president of the Brazilian Central Bank, Alexandre Tombini, said in Davos that the Brazilian Gross Domestic Product (GDP) growth by about 2% in 2013 is insufficient, but noted that there is space for growth, particularly by supplying manufactured products.

“It was not good enough. We have to do more, move forward. The government has a wide range of areas to work on. We have a broad infrastructure agenda – airports, great games coming up (2014 World Cup and 2016 Olympic Games) -, emphasizing on education, on a pro-growth agenda. We are very well organized in this sense,” declared Tombini.

According to information from the Brazilian Institute of Geography and Statistics (IBGE), the GDP of Brazil increased by 2.2% in the third quarter of 2013.

Record Tourism

Brazilian tourists spent a record US$ 25,342 billion in travels abroad in 2013, according to information from the Central Bank. In 2012, international travels expenses registered at US$ 22.233 billion. Last December alone, these expenses reached US$ 2.217 billion, against US$ 1.989 billion in the same of the previous year.

Revenues from foreign tourists traveling to Brazil reached US$ 579 million in December and US$ 6.710 billion for the whole of 2013, against US$ 562 million and US$ 6.645 billion in the same periods in 2012, respectively.

With these results, the international tourism balance closed at a US$ 18.632 billion deficit in 2013, against US$ 15.588 billion in 2012. In December, the negative result reached US$ 1.638 billion.

The Central Bank’s forecast for the international tourism balance in 2013 was of US$ 18.6 billion. For 2013, the institutions expects a US$ 19 billion deficit.

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