Brazil Economists Cut 2013 Growth Forecast to Lowest This YearMatthew Malinowski
Brazil economists cut their 2013 growth forecast to the lowest this year, as the world’s second-largest emerging market grapples with flagging consumer confidence and persistent inflation.
Brazil’s gross domestic product will grow 2.24 percent this year, compared with the previous week’s forecast of 2.28 percent, according to an Aug. 2 central bank survey of about 100 analysts published today. This was the 11th time in the past 12 weeks that economists reduced their 2013 GDP expectations.
President Dilma Rousseff’s administration is trying to balance policies aimed at sparking growth while slowing price increases that are near the top of the target range. While officials last month cut 10 billion reais ($4.4 billion) from the budget to help control spending, a weaker real has fueled inflation, and policy makers have lifted the key rate 125 basis points this year. The central bank has signaled it may extend rate increases to ensure inflation doesn’t hurt demand and investments.
Swap rates on the contract due in Janurary 2015 rose three basis points, or 0.03 percentage point, to 9.75 percent at 9:03 local time. The real was little changed at 2.2888 per U.S. dollar and has weakened 10.3 percent so far this year.
Falling food and transportation costs helped slow annual inflation to 6.4 percent in mid-July from 6.67 percent the month prior. Policy makers target inflation at 4.5 percent plus or minus two percentage points.
Recent economic indicators indicate Brazil’s economy is struggling to accelerate. While industrial production increased more than economists forecast in June, output has contracted in 5 of the past 12 months. Consumer confidence plunged in July to the lowest level since May 2009, according to a survey from the Fundacao Getulio Vargas.
Latin America’s largest economy expanded by 0.9 percent last year, down from 2.7 percent in 2011 and 7.5 percent in 2010.