Brazilian Industry Expecting 3.2% GDP Growth for Brazil in 2005

Brazil’s National Confederation of Industry (CNI) revised the projections it made in March for this year, considering the downward direction of inflation and the government’s annualized benchmark interest rate (Selic).

“The economy should resume growth this semester, but without the same vitality as in the second half of last year,” the coordinator of the CNI’s Economic Policy Unit, Flávio Castelo Branco, explained in a collective interview.


Whereas the government estimates that this year’s primary surplus (the difference between federal revenues and expenditures, excluding interest payments) will amount to 4.25% of the Gross Domestic Product (GDP), the CNI is projecting a 4.5% primary surplus.


For the Selic rate, the forecast is that it will close the year at 19.1%, as against the 18% announced in March. The projection for GDP growth this year is 3.2%, driven by industry, which the CNI expects to expand 4.2%.


Castelo Branco says that the predictions for the GDP and for industry are predicated on lower interest rates.


Agriculture is expected to grow 2.3%; mining, 11.5%; manufacturing, 3.8%; construction, 2%; and tax revenues, 4.7%.


Other estimates drawn from the CNI’s Conjunctural Note, released at the interview, are for a 2.9% growth in family consumption for the year, a 1.3% growth in government consumption, a 12.3% increase in exports, and a 12.5% increase in imports, compared with 2004.


The only forecast that remained unchanged from March was for this year’s Broad Consumer Price Index (IPCA): 6%.


“Inflation took a strong dip in the second quarter, in both wholesale and retail prices, and even registered negative rates,” the Conjunctural Note observes.


In March the CNI forecast a GDP of 4%, which was revised to 3.2%. Projected growth in industrial GDP was lowered from 4.8% to 4.2%, and physical production in industry, from 4.8% to 3.8%.


The estimate for exports in 2005 was raised from US$ 108 billion to US$ 114 billion, while the estimate for imports remained unchanged, at US$ 76 billion.


The forecast for the government deficit went from 2.4% of the GDP to 3.2% of the GDP, while the projected ratio of net government debt to the GDP was raised from 50% to 50.5%.


The Conjunctural Note also predicts the “start of a downward cycle in the Selic rate beginning in the third quarter” and remarks that “the bigger the drop during the rest of the year, the greater the investments that will be drawn to the country.”


ABr – www.radiobras.gov.br

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