Brazil’s Industrial Capacity Nearing Its Limit

Brazilian market analysts and financial consultants interviewed last week by Brazil’s Central Bank expressed growing optimism over this year’s growth in the Gross Domestic Product (GDP).

The survey, released today, suggests that the GDP will end the year at 4.5%, compared with forecasts of 4.23% a month ago and 4.47% last week. The weekly rise is small, but it has gradually been maintained for 13 consecutive weeks.

The projection for 2005, on the other hand, suffered a slight decline, from 3.55% to 3.50%, back to its previous level.

The forecast for this year’s GDP reflects, in part, the resumption of industrial production, which the market expects to increase 6.61% this year, compared with last week’s estimate of 6.50%. Production, however, is pushing the limit of existing industrial capacity.

Still, it should be sufficient to meet the growing demand for Brazilian exports, which should generate a US$ 32 billion surplus in this year’s trade balance, according to the survey.

This performance has a positive impact on projections for the external current account surplus, which is expected to attain US$ 9.2 billion (as against last week’s estimate of US$ 8.97 billion), after interest payments on the debt are deducted.

The market raised its earlier expectations for foreign direct investments this year from US$ 11 billion to US$ 14.95 billion. The forecast for next year continues to be US$ 13 billion.

Agência Brasil
Translator: David Silberstein


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