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IMF warns Brazil could be laggard in BRICS
October 9, 2013, 8:37 am

Brazil's 2013 growth forecast is maintained at 2.5 per cent, according to the IMF [Getty Images]

Brazil’s 2013 growth forecast is maintained at 2.5 per cent, according to the IMF [Getty Images]

A new International Monetary Fund (IMF) report has warned that Brazil could be placed in the bottom rung of the BRICS in terms of economic growth next year.

The IMF’s World Economic Outlook report on Tuesday forecast growth of 2.5 per cent next year compared to an earlier estimate of 3.2 per cent.

The figure for Brazil, now the world’s seventh largest economy, is the lowest among the BRICS bloc.

A top IMF official had earlier in September slammed reports of an economic wane in Brazil, saying the “economy is solid”.

“Brazil went through a period of great success…Now there is a more negative assessment that is going to the opposite extreme,” said Paulo Nogueira Batista, the IMF’s Executive Director for Brazil.

Batista said the economy is showing signs of recovery and recent speculation about the country’s economic crisis is exaggerated.

Brazil’s 2013 growth forecast is maintained at 2.5 per cent, according to Tuesday’s report, higher than the 2.47 per cent growth prediction made recently by the Central Bank of Brazil.

The Latin American nation posted an anaemic 0.9 per cent GDP growth last year, a stark contrast to the 7.5 per cent of 2010.

Brazil’s Central Bank President Alexandre Tombini said last week in London that the country’s third quarter GDP growth would not be as low as previously expected.

“We might have third quarter of accommodation, this is expected by market participants, but more benign than people were expecting,” said Tombini.

Inflation in Brazil is a problem as it erodes real income and impacts consumption levels, according to the IMF.

However, the depreciation of the country’s currency against the US dollar is considered positive as it can boost exports.

The Brazilian central bank said Brazil’s inflation rate was “under control” and slowly decreasing towards the 4.5 per cent target set for this year.

The accumulated inflation rate from January to August stood at 3.43 per cent.

Brazil has raised its base interest rate four times this year in a bid to curb inflation — the rate now stands at a towering nine per cent.

Later this week the nation’s central bank is likely to raise the country’s base interest rate again to bring inflation down to a manageable level.

The recent economic slowdown has dogged the Rousseff administration, who reacted to some of the more strident criticism earlier this month.

“We are the third fastest growing economy of the world in the second quarter. Who bets against Brazil, always loses,” President Dilma Rousseff tweeted recently.

Brazil is the world’s top producer of coffee and sugar and one of the biggest producers of meat, soybeans and iron ore.

Source: Agencies