March 6 (Bloomberg) -- Brazil’s economy last year posted its second-weakest performance in eight years on higher borrowing costs and a currency that rallied to a 12-year high in July.
Gross domestic product grew 2.7 percent in 2011, the national statistics agency said today in Rio de Janeiro. The forecast was for 2.8 percent growth, according to the median estimate from 32 economists in a Bloomberg survey. In the fourth quarter, the second-largest emerging market after China grew 0.3 percent from the previous three months.
The GDP figure underscores central bank President Alexandre Tombini’s view that the economy has grown “below capacity” over the last three quarters, creating room for further cuts in interest rates. Growth will pick up speed and reach an annualized pace of more than 5 percent in the second half of the year, Finance Minister Guido Mantega said last month.
Economic expansion last year slowed as the central bank increased rates through July to combat inflation. Since August, the bank has reduced the overnight rate by 200 basis points to 10.50 percent, cut taxes on consumer goods and pledged to boost public works. Traders are wagering that policy makers will cut the benchmark Selic rate to 9 percent by July.
Manufacturers from steel to textiles were hit last year as the real rallied to a 12-year high of 1.54 to the U.S. dollar in July, reducing the cost of imports.
Brazil’s inflation, as measured by the IPCA-15 price index, slowed to 5.98 percent in the 12 months through mid-February, its slowest pace since December 2010.
The yield on interest rate future contracts maturing January 2014 declined four basis points, or 0.04 percentage point, to 9.55 percent at 9:17 a.m. in Brasilia. The real weakened 0.4 percent to 1.7464 per U.S. dollar.
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