Brazil’s economic growth in 2013 will outpace Mexico’s for the first time in three years as fiscal stimulus measures and lower interest rates boost domestic demand, the World Bank forecast.
Brazil’s $2.5 trillion economy, the largest in the region, will grow 3.4 percent this year, up from 0.9 percent in 2012, while Mexico’s expansion slows to 3.3 percent from 4 percent as growth in the U.S., its main export market, remains sluggish, the Washington-based bank said in a report today.
“Particularly in Brazil, the benefits of lower interest rates are expected to start kicking-in during the course of the year, which should underpin stronger domestic demand growth,” the bank said.
Weaker demand for commodities and a slowdown of domestic demand in larger economies such as Brazil caused Latin America and the Caribbean in 2012 to grow at the slowest rate of the six developing regions after Eastern Europe-Central Asia, the bank said. Mexico’s economic growth has outstripped Brazil’s in the past two years as it is more reliant on manufactured exports to the U.S.
Brazil’s central bank has cut its benchmark interest rate more than any other Group of 20 nation, pushing it to a record low of 7.25 percent last year. Mexican policy makers have kept their key rate unchanged at 4.5 percent for more than three years.
The bank forecasts Latin America will grow 3.5 percent this year and 3.9 percent in 2014 and 2015, given a “more accommodative policy environment” in some larger economies.
Brazil’s Bovespa (IBOV) stock index grew 7.4 percent in 2012, while Mexico’s index climbed 17.6 percent.
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