Brazil’s economy is forecasted to grow 6.1% in 2010, bolstered by rising domestic demand, increasing exports and higher investment, according to Banco Bradesco, the country’s second-largest bank by market value.
However a majority of economists target a more conservative 3.8 to 5% expansion for Latin America’s biggest economy next year according to a Central bank survey made public earlier this week.
Brazil’s GDP will accelerate from 0.5% this year as record-low interest rates boost consumer demand and commodity exports to emerging markets such as China increase, Bradesco chief economist Octavio de Barros wrote in a report.
However the report also anticipates that the central bank may need to raise borrowing costs earlier next year than previously forecast, as tax cuts fuel consumer spending and threaten inflation targets. Bradesco predicts the benchmark interest rate, the Selic, will rise to 11.5% next year from the current 8.75%.
The report also forecast a current-account deficit of as much as 64.7 billion USD next year, almost double the 33.41 billion USD reached in 1998, which was the widest since the central bank started tracking the data in 1947.
Growing imports, boosted by a stronger currency, have led economists to raise their 2010 estimates for seven consecutive weeks to 35.5 billion USD according to the same survey. So far this year the Brazilian currency Real has gained 33% against the US dollar and the benchmark Bovespa stock index, 77%.
The government increased spending 16.5% in the first 10 months of 2009 compared with last year as President Lula da Silva seeks to fuel the economy’s recovery from its first recession since 2003.