Central Bank Lowers Brazil’s 2005 GDP Estimate from 3.4% to 2.6%

Brazil’s Central Bank (BC) lowered its estimate for this year’s growth in the Gross Domestic Product (GDP) from 3.4% to 2.6%. This forecast is part of the Quarterly Inflation Report, which was released Wednesday, December 28.

The latest report indicates the 1.2% drop in the GDP registered in the third quarter by the Brazilian Institute of Geography and Statistics (IBGE) as one of the main reasons for the lower estimate. The outlook for 2006 is for the GDP to grow 4%.

The report also estimates that the Broad Consumer Price Index (IPCA), which is the index of inflation used by the Brazilian government, will end the year at 5.7%, above the 4.5% target set by Brazil’s National Monetary Council (CMN). The BC is operating under the assumption that inflation will amount to 3.8% in 2006 and 3.6% in 2007.

In the judgment of the BC’s director of Economic Policy, Afonso Bevilaqua, the drop in the estimated GDP growth is "a thing of the past."

According to him, the prospect is one of recovery in the final quarter of 2005, due to the increase in the number of jobs and the real salary mass, as well as inventory equilibrium in the productive sector and credit expansion.

Bevilaqua observes that preliminary industrial and commercial data suggest a "more dynamic" economy from November on, which should ensure 3% growth in industry, 2.1% in services, and 1.5% in the agricultural sector in 2005.

The BC expects recovery in all segments of the economy next year: 5.3% growth in industry, 4.8% in agriculture, and 2.9% in services.

The performance of Brazil’s industry, he adds, should receive direct, positive impacts from domestic petroleum production and the favorable international economic situation, even with the slight decline in international oil prices.

The projection for the performance of the Brazilian agriculture is based on the estimated 2005/2006 agricultural harvest, in which grain production is expected to increase 12%.

Agência Brasil

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