MercoPress. South Atlantic News Agency

Brazil’s central bank forecasts strong rebound in last quarter and early 2013

Stimulus measures haven’t fully taken hold yet said Tombini

Brazil’s economy will be expanding in the beginning of next year at the fastest pace since the last quarter of 2010, said central bank President Alexandre Tombini.

The world’s biggest emerging economy after china will grow more than 4.5% in the first quarter of 2013 from a year earlier, Tombini said at an event in Sao Paulo. Growth will accelerate to a 4% pace in the last quarter of this year, he said.

President Dilma Rousseff’s administration has reduced the benchmark interest rate to a record low, cut taxes and taken measures to boost credit in a bid to shore up economic growth. Record low unemployment will help sustain domestic demand, spurring a rebound from the first quarter, when Brazil posted its weakest year-over-year economic performance since the aftermath of the Lehman Brothers Holdings Inc. bankruptcy in 2008.

“Consumption is what will propagate growth, stimulating new private investments that will support sustainable growth over the next years,” Tombini said. “Important stimulus measures that have already been introduced haven’t fully taken hold yet.”

The economy expanded 0.75% in the first quarter of 2012 from a year earlier, its worst performance since a 1.47% contraction in the third quarter of 2009, the national statistics agency said.

Tombini said Brazil has room to boost economic growth by fuelling consumption without threatening its 4.5% inflation target.

Inflation slowed to 4.99% in the 12 months through May, down from 7.31% in September, according to the statistics agency.

“It’s important to highlight, at this moment that inflation continues to slow and move toward the target” Tombini said. “Profound structural changes in the last years, combined with a series of elements that guarantee support to domestic demand and the important stimulus already implemented, indicate there is still room to increase consumption”.