MercoPress. South Atlantic News Agency

Flat economy and record exports in Brazil.

Brazil economic growth forecast for 2003 has been cut by more than half from 1,5% to 0,6%, according to the latest quarterly report from the Central Bank.

The Brazilian government expects economic recovery to begin during the fourth quarter, not the third quarter, as it had previously anticipated. Inflation for 2003 on the other hand is expected to reach 8,9% down from previous expectations of 10,2%.

However Brazilian foreign trade is booming with a surplus of 2,67 billion US dollars in September the second highest in history, with a nine months accumulated surplus of 17,8 billion US dollars.

Industry, Development and Foreign Trade Ministry figures indicate that Brazilian exports last September totalled 7,28 billion US dollars, 12% increase over the same month in 2002. Imports increased 15,2% reaching 4,6 billion US dollars.

During the first nine months of 2003 overseas sales reached 55,8 billion US dollars and imports 34,99 billion US dollars with an accumulated surplus of 17,8 billion US dollars equivalent to a 126% increase over the same period in 2002.

But the Brazilian government also cautioned about the domestic market and consumer purchasing power.

"It will take some time for salaries to recover, but we have signs that the recovery has begun and will continue in 2004", said Marcos Lisboa Economic Policy Secretary.

Nevertheless inventories remain high reinforcing the perception that excessive fiscal tightening may contribute to delay the economic recovery.

The primary budget surplus (before interest payments) reached 4,91% of GDP in the first eight months of 2003, above the agreed target with the IMF of 4,25%.

Brazilian economists believe the country requires accelerated growth to ensure long term public debt servicing and lower country risk premium.