Bloomberg News

Brazil’s Economy Expands at Slowest Pace in 10 Quarters

November 24, 2011

(Updates with growth in emerging markets and China in fifth paragraph.)

Nov. 23 (Bloomberg) -- Brazil’s economy expanded at the slowest pace in 10 quarters in the three months through September after policy makers curbed bank lending and raised interest rates to rein in inflation.

Gross domestic product grew 0.3 percent from the previous three months, according to an estimate given to Congress today by the Finance Ministry in Brasilia. That’s equivalent to annualized growth of 1.2 percent. GDP expanded 0.8 percent in the second quarter. The national statistics agency will publish the official third-quarter GDP report Dec. 6.

Policy makers started to cut rates in August and eased curbs on credit this month to shield Latin America’s biggest economy from a slowdown in global growth. Finance Minister Guido Mantega said today President Dilma Rousseff’s administration will continue to create the necessary conditions for the central bank to reduce interest rates, which are the highest in the Group of 20 nations.

“We’re seeing a worsening of the crisis,” Mantega said during a congressional hearing. “Conditions similar to those of 2008 are returning and that has us very worried. The government will continue to take necessary measures to control this crisis.”

Brazil, after expanding faster than most emerging markets last year, will underperform its peers this year, according to International Monetary Fund estimates. GDP will grow 3.8 percent, while emerging markets and China will expand 6.4 percent and 9.5 percent respectively, the IMF said in its September World Economic Outlook.

Picking Up

Brazil’s economic growth will accelerate in November and December and will quicken to as much as 5 percent next year as the government takes measure to reduce borrowing costs for consumers and companies, Mantega told reporters today.

GDP may have grown more than 7.5 percent in 2010 and the statistics agency is reviewing the data, he said. GDP growth will be 3.16 percent this year, according to a central bank survey of economists published this week.

“The economy slowed in 2011 because it was necessary,” Mantega said. “We had an inflation problem, but now inflation is under control.”

Inflation, as measured by the benchmark IPCA-15 price index, slowed to 6.69 percent in the 12 months through mid- November, its slowest pace in five months, the national statistics agency said today. Since May, inflation has remained above the government’s 2.5 percent to 6.5 percent target range.

Rate Outlook

Traders are wagering policy makers will reduce the benchmark interest rate by at least 50 basis points to 11 percent this month, interest rate futures show. Policy makers cut the Selic rate by half a point in each of its two previous meetings.

Yields on interest rate futures maturing in January 2013, the second most traded in Sao Paulo, fell 11 basis points to 9.9 percent as of 12:57 p.m. New York time, on bets slower growth in China, the U.S. and Europe will open room for central bank President Alexandre Tombini to further cut rates.

--Editors: Adriana Arai, Philip Sanders

To contact the reporter on this story: Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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