• Categories
  • Archives

Weak Domestic Demand and Low Investment Make Brazil Ugly Duckling of LatAm’s Recovery

Brazil will have to resist pressures for fiscal easing to sustain high primary surpluses and to raise medium term growth through reform efforts including improving the quality of fiscal policy and the business climate, according to IMF’s World Economic Outlook released this week.

IMF forecasts Brazil’s expansion in 2006 and 2007 to be in the range of 3.5%, but corrected downwards growth estimate for 2005 from last September’s 3.3% to 2.3%.

In Brazil, says the report, activity slowed sharply last year. Domestic demand remained subdued due primarily to inventory adjustments and some softening in investment following the earlier tightening of monetary policy, although private consumption has remained robust, underpinned by rising employment and real incomes.

There are recent signs of a pickup in activity, such as in retail sales and industrial production, and growth is expected to strengthen in 2006 as lower interest rates spur a recovery in investment.

With inflationary pressures moderating and inflation expectations well grounded, IMF believes there’s room to continue the gradual reduction of policy interest rates initiated in September 2005.

Furthermore reflecting strong revenue efforts the consolidated primary surplus reached 4.8% of GDP in 2005 well above the 4.25% target.

Finally IMF recommends that to continue the progress made in reducing public debt, Brazil will have to resist pressures for fiscal easing to sustain high primary surpluses and to raise medium term growth through reform efforts.

The report also points out that in 2005 in contrast with the robust expansion of Latin America given the strong global demand for commodities, in particular fuels, metals and agriculture, Brazil’ growth owing to weak domestic demand and investment, slowed.

Although not specifically mentioning any country, IMF underlines that the region as a whole faces a busy electorate schedule this year "underscoring the importance of maintaining sound economic policies and defending hard earned credibility among domestic and foreign investors during political transitions."

Next October Brazil is holding presidential and congressional elections.

Mercopress – www.mercopress.com

Tags:

  • Show Comments (1)

  • Guest

    Brazil Ugly Duckling of….
    LATAM recovery.

    Strange, when one listen to Lula speeches and self compliments, he says the exact opposite.
    Who is right ??????

    What a joke full of lies….this Lula !

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Por aí

Bringing back Carnaval For those who missed Rio’s latest Carnaval parade and for those ...

Brazil’s Would-Be President Goes on Hunger Strike and Alienates Own Party

PMDB presidential pre-candidate Anthony Garotinho is on a hunger strike. It began on Sunday ...

Threatened with Death Rio’s Assemblyman Flees Brazil to Undisclosed European Country

Brazilian Marcelo Freixo, a high-profile state assemblyman in Rio de Janeiro, who investigated criminal ...

Developed in Brazil Soybean Rust Warner Is on the Web

Syngenta Crop Protection yesterday launched its Syntinel RustTracker system, an early-warning Web-based system that ...

Brazilian Software Teaches English in the US

A company from Curitiba, in the southern Brazilian state of Paraná, is teaching Lebanese ...

Brazil’s Space Race on Throttle Up

Brazilian President Luiz Inácio Lula da Silva announced that despite the destruction of Brazil’s ...

Google and Brazil Showdown: Both File Lawsuits.

In anticipation of the Brazilian Justice move today, August 22, to ask for the ...

Dengue and TB: A Two-Front Battle in Brazil

Brazil government’s actions to control dengue resulted in a 73.3% reduction in the incidence ...

Cattle from Uruguay

The Invasion of Uruguay. Brazil Has Taken Over the Meat and Rice Industries

In Uruguay, as in all other countries in the region, the expansion of single-crop ...