Brazil is cutting spending for the second time in two months to help meet its fiscal target as it forecasts slower growth this year which was also confirmed according to the latest Central Bank survey. The economic data was announced while Brazil had its eyes and ears in Rio do Janeiro to receive Pope Francis.
The government is reducing expenditures by 10 billion Reais (4.5 billion dollars approx) and lowering this year’s economic growth forecast to 3% from 3.5%, Finance Minister Guido Mantega said on Monday. However the government will meet its primary budget surplus target, which excludes interest payments, of 2.3% of GDP this year without reducing investments, insisted the minister.
President Dilma Rousseff has pledged to contain expenditures to help control inflation that has exceeded the upper limit of the central bank’s target range twice this year. The government will cut travel, information technology, rental and outsourcing expenses, Planning Minister Miriam Belchior told reporters alongside Mantega in Brasilia.
Economists cut their 2013 economic growth forecast for the 10th consecutive week to 2.28% in a central bank survey published today. While the government is open to further revisions of its GDP outlook, Mantega cautioned about changing forecasts too frequently.
Rousseff is balancing efforts to slow consumer price increases while meeting public demands for improved health care, education and public transportation. More than one million Brazilians in June demonstrated throughout the country for lower bus fares, less government corruption and better public services, among other issues.
On May 22, Mantega said the government was cutting 28 billion Reais in spending.
Standard & Poor’s in June lowered its outlook for Brazil’s BBB credit rating, citing a loss of credibility in the government’s fiscal accounts. Last week Fitch Ratings affirmed its BBB rating and said policy adjustments may improve confidence in Brazil’s economy.
Brazil’s first-quarter economic growth unexpectedly slowed to 0.55% from the previous three-month period, falling short of analysts’ forecasts for the fifth straight quarter. GDP climbed 0.9% last year, the worst performance since the 2009 recession.
Consumer prices rose 6.4% in the year through mid-July after breaching the upper limit of the central bank’s 2.5% to 6.5% target range the previous month. Annual inflation will end the year at 5.75%, according to the median estimate of analysts polled July 19 by the central bank.