Tuesday, March 6, 2012
Brazil economic growth slowed to 2.7 per cent in 2011
Although 2.7 per cent growth might look quite acceptable to many European countries among the BRIC (Brazil, Russia, India, China) it is on the low end of the scale.
The poor performance arises from higher borrowing costs and a currency that is very high compared to many others. The high rial leads to exports being more expensive.
Many analysts think that the central bank will lower interest rates to stimulate borrowing. Finance Minister Guido Mantega predicts growth will increase to 4.5 per cent this year. However analyst John Welch said:"Brazil is losing international competitiveness," "They're blaming all the problems on the exchange rate, but have ignored structural reforms."
In 2010 Brazil grew by 7.5 per cent but this last year Brazilian growth trailed that of India and China. Growth this in Brazil fell short of the 4.6 average growth for South America predicted by the IMF.
The central bank increased lending rates last July to curb inflation but afterward economic expansion slowed. Now it is expected that rates will again be lowered even though inflation at 4.3 per cent remains relatively high. For much more see the full Bloomberg article.