Dec. 14 (Bloomberg)-- Brazilian inflation will continue to slow to the central bank’s target next year, Deputy Finance Minister Nelson Barbosa said yesterday.
Consumer price increases will slow even as service inflation remains above the average, Barbosa said at an event in Porto de Galinhas, in Brazil’s Pernambuco state.
President Dilma Rousseff’s administration has revamped efforts to spur the economy while keeping a lid on inflation in the world’s second-largest emerging market. Brazil’s gross domestic product will grow 1.03 percent this year, the lowest among major emerging markets, according to a Brazilian central bank survey. Annual inflation has remained above the central bank’s 4.5 percent target for over two years and accelerated in November to 5.53 percent, even as economic growth flagged.
“There is no inflation risk,” Barbosa said. “Brazil has its economy in order, and its inflation under control.”
Still, analysts forecast inflation will reach 5.4 percent next year, according to the latest central bank survey of about 100 economists.
Swap rates on contracts due January 2014 fell two basis points, or 0.02 percentage point, to 7.06 percent. The real depreciated 0.6 percent to 2.0856 per dollar.
Since August 2011, authorities have cut taxes for both companies and consumers, reduced benchmark interest rates to record lows and announced plans to lure billions of reais in infrastructure investments to spur Brazil’s economy, which grew 0.6 percent in the third quarter, half the pace forecast by economists. Last week, authorities said they would extend payroll tax reductions to the construction sector.
Government officials are considering cutting taxes on venture capital funds, as well as payroll tax cuts in additional industries such as the service sector, Barbosa said.
Even as authorities plan those reductions, Brazil will have a larger primary surplus in 2013 compared to this year, Barbosa said, adding that the surplus will be close to 3.1 percent of GDP.
Brazil will work to fulfill promises of reducing energy costs by 20 percent next year. “Electricity is as important as interest rates and exchange rates,” Barbosa said.
Rousseff said in France this week that she would maintain the current course of economic policy, adding that the government will work to boost manufacturing and increase competitiveness.
Brazil’s government is maintaining forecasts of at least 4 percent GDP growth next year, Finance Minister Guido Mantega said last week. The world’s sixth-largest economy expanded 2.7 percent last year, down from 7.5 percent in 2010.
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