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Brazilian economy recovering
January 16, 2013, 5:57 pm


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Brazil’s economy is on the verge of breaking through the fog of negative reports for the first time in three years.

Between 2004 and 2007, Brazil averaged nearly 5 per cent in GDP growth, but the global economic crisis brought these numbers down to eventually 0.9 per cent in 2012.

The World Bank says that Brazil’s economy is now expected to grow by 3.4 per cent in 2013, just ahead of Mexico’s 3.3 per cent.

Although the World Bank earlier in the year revised its figures and forecast lower global growth due to austerity measures and weakened consumer purchasing power, a recent report indicated that developing countries and emerging markets were doing better than their Western counterparts.

Commenting on emerging markets, the World Bank said: “Despite slow growth in high-income countries, prospects for the developing world remain solid (albeit between 1 and 2 percentage points slower than in the pre-crisis period).”

“Despite a relatively weak external environment, domestic demand in the Latin American and the Caribbean region held-up relatively well, recording GDP growth of 1.9 per cent in the third quarter, as slightly stronger (albeit still weak) growth in Brazil compensated for decelerating growth elsewhere, particularly in Argentina and Mexico.

“The recovery in industrial production was even more marked, with output expanding at a 3.4 per cent annualised pace during the third quarter, due to a recovery in Brazil and Argentina,” the January 2013 report said.

“Particularly in Brazil, the benefits of lower interest rates are expected to start kicking-in during the course of the year, which should underpin stronger domestic demand growth,” the World Bank report said.

According to Bloomberg News, citing Brazil’s central bank, the economic activity index rose more than economists forecast in November.

However, analysts caution that Brazil needs to keep its inflation in check before it offsets encouraging growth statistics.

Inflation during 2012, when growth stalled at 0.9 per cent, was 5.8 per cent – above the central bank’s benchmark of 4.5 per cent – for the third consecutive year.

With input from Agencies