Brazil’s government for next year expects faster growth and a weaker currency than economists forecast, according to the 2013 budget guidelines proposed by the administration of President Dilma Rousseff today in Brasilia.
The real will trade at an average exchange rate of 1.84 per U.S. dollar, while the economy will expand by 5.5 percent in 2013, according to the proposal the government will present to Congress before April 15.
Economists expect gross domestic product to expand by 4.2 percent and the real to trade at an average of 1.78 next year, according to a central bank survey of about 100 analysts published April 9. The real has averaged 1.71 against the dollar over the past 12 months.
“We don’t have a fixed exchange rate. But we’ll work so that the currency doesn’t harm the economy,” Budget Minister Miriam Belchior told reporters in Brasilia after presenting the legislative proposal.
A strong currency, which hit a 12-year high in July last year, has helped turn the trade balance in manufacturing goods from an $8.7 billion surplus in 2005 into a $93 billion deficit last year, according to the Trade Ministry. The government has bought dollars in the foreign-exchange market and expanded taxes on foreign loans and bonds issued abroad in response to what Rousseff called a “monetary tsunami” from developed nations seeking to weaken their currencies and foster export growth.
The government also cut interest rates by 275 basis points since August to 9.75 percent and last month extended tax cuts for appliances to stimulate consumer spending and help fuel economic growth.
Brazil’s inflation should slow ll to the government’s target of 4.5 percent next year, with the country’s benchmark rate at 9 percent by the end of 2013, according to the budget plan.
Annual inflation slowed to 5.24 percent through March, a 17-month low.
The government-fixed minimum wage will rise 7.3 percent to 667.5 reais ($364) next year, according to the proposed budget guidelines.
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