Bloomberg News

Brazil Economists Reduce 2012 Growth Forecast for Third Week

August 20, 2012

Analysts covering Brazil’s economy cut their 2012 growth forecast for the third straight week, even after recent signs that the economy may be picking up speed.

Brazil’s gross domestic product will expand by 1.75 percent, according to the median estimate in a central bank survey of about 100 analysts published today, down from last week’s estimate of 1.81 percent. The economists have reduced their growth estimates in 13 out of 15 weeks since May 7, and have held their estimates steady in the other two.

Since last August, President Dilma Rousseff’s administration has cut the benchmark Selic rate to a record low 8 percent, pressured commercial banks to increase lending and cut taxes on consumer goods to fuel growth in the world’s second-largest emerging market. Recent economic indicators signal that the measures may be taking effect.

Retail sales in June rose the most since January on higher furniture and appliances sales. Brazil’s seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.75 percent in June, the fastest pace since March 2011. Last week, Standard Chartered Plc (STAN) raised its growth forecast for the second quarter to 0.4 percent from 0.2 percent.

Inflation as measured by the IPCA index quickened in July to 5.2 percent, as adverse weather in Brazil and the U.S. drove up food prices. Price increases will slow to the central bank’s inflation target of 4.5 percent by year-end, central bank President Alexandre Tombini said on Aug. 17.

Economists in the survey boosted their 2012 inflation forecast for the sixth straight week to 5.15 percent from 5.11 percent last week.

The central bank forecasts growth of 2.5 percent this year, down from 2.7 percent last year and 7.5 percent in 2010. The economy will be growing at a 4 percent annual pace by year-end and will enter 2013 at “cruising speed,” Finance Minister Guido Mantega told reporters on Aug 16.

To contact the reporter on this story: Matthew Malinowski in Santiago at

To contact the editor responsible for this story: Philip Sanders at

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