Brazilian Industry Blames High Interest Rates for Paltry GDP

The president of Brazil’s Federation of Industries of the State of São Paulo (Fiesp), Paulo Skaf, referred to the 0.3% increase in the Gross Domestic Product (GDP) in the first quarter of this year, as announced by the Brazilian Institute of Geography and Statistics (IBGE), as “piddling.”

“This is the worst result in the last seven quarters and projects an annual expansion of only 1.21%,” he remarked in a note to the press.


“This miserable performance is due to high interest rates, which permitted investments to grow only 2.3%, compared with the first quarter of last year.”


Skaf pointed out that, in comparison with the first quarter of 2004, the Brazilian GDP rose 2.9%, “as against 4.7%, 5.9%, and 5.1% in previous comparisons. It is always well to recall that the global economy will expand 4.4% in 2005. In the first quarter, China experienced growth of 9.1%, and the United States, 3.5%,” he observed.


Besides the result for the first quarter of this year, the president of the Fiesp mentioned that the IBGE revised last year’s growth figure down from 5.2% to 4.9%.


According to Skaf, growth in 2004 reflected the performance of sales abroad, which encouraged investment.


“In 2005, however, everything is happening differently. The increase in interest rates toppled the investments that propelled growth in 2004. These investments still registered a growth of 9.3% in the fourth quarter and a paltry 2.3% in the first quarter of 2005.


“In marginal terms, this meant drops of 3.9% and 3.0%, respectively, in the fourth quarter of last year and the first quarter of this year,” he said in the note.


Skaf also recalled that the growth in exports contributed to the GDP this quarter (13.6%) and in the previous one (16.2%).


“But the enhanced appreciation of the exchange rate in the second quarter will surely have an effect on the contribution of foreign sales to the growth of the economy,” he remarked.


Agência Brasil

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