The Brazilian economy is expected to grow 3.1% this year while inflation will reach 5.7% according to the latest estimates from the Central bank released in its “Quarterly inflation report”. In the previous report at the end of last year inflation was estimated at 4.8% but there was no figure for growth.
The latest report indicates the Central bank expects the Brazilian economy to begin picking up steam in 2013 after suffering a considerable slowdown in the last two years allegedly as a consequence of the international crisis. In 2010 the economy rolled ahead at 7.5% but GDP in 2011 only expanded 2.7% and 0.9% in 2012.
“This growth projection (3.1%) for this year contemplates a more intense rhythm of activity for the Brazilian economy with the recovery of investments and with a growth pattern more in line with the country’s potential” points out the report.
The Central bank estimate for this year is close to the 3% average a majority of economists and markets analysts forecasted last week, but below the 4% estimate from the Ministry of Finance.
According to the Central bank agriculture will play a leading role with production increasing 6% after a 2.3% retraction in 2012. Manufacturing will expand 2.3% after yielding 0.8% last year and services should expand 3.1% following a slight expansion of 0.7% in 2012.
Domestic consumption which has become the engine of the Brazilian economy is poised to climb from 3.1% in 2012 to 3.5% this year, based “on the moderate expansion of credit and the tight labour market”.
Finally regarding inflation the Central bank estimates 5.7% this year decreasing to 5.3% in 2014, which means that in both cases it will be below the 5.84% of 2012 and 6.5% of 2011. Market analysts also agree with the bank since they estimate prices will climb 5.71% this year and 5.6% in 2014.
The resurgence of inflation in recent months has become a major challenge for the Brazilian central bank which ended its policy of interest-rate gradual reductions geared to promote economic growth and which has remained unchanged since last October at 7.25%.