Brazil unsure of growth, forecast due to euro jitters

BRASILIA - Agence France-Presse

Brazil’s President Dilma Rousseff. AFP photo

Brazil has admitted it is unlikely to meet an economic growth forecast of 4.5 percent over concerns about the eurozone and announced a new stimulus package in a bid to reverse a recent slowdown.

“If the crisis worsens or continues to worsen, if they do not resolve the problem of Greece, then it will be difficult to achieve a growth rate of 4.5 percent,” Finance Minister Guido Mantega said at a press conference on May 21. However, he said the world’s sixth largest economy had “more favorable conditions than other countries to react to a worsening of the crisis and continue to grow.

“I do not say 4.5 percent, but more than the 2.7 percent in 2011,” he said.

Market analysts polled in a weekly Central Bank survey on May 21 forecast a growth of 3.09 percent to 3.2 percent. Mantega declined to make a new prediction for 2012 growth but said he anticipated economic growth of 4.5 percent to 5.0 percent in the second half of the year.

The economic headwinds -- which Mantega said were affecting all emerging countries, including China -- prompted the government to announce a new stimulus package aimed at reviving the flagging auto sector. “This sector represents 20 percent of industrial GDP, it is responsible for significant investment, and we want Brazil to remain the third largest auto manufacturer in the world after China and the United States,” he said.

Brazil’s growth slumped to 2.7 percent in 2011 after expanding by 7.5 percent the previous year, prompting the government to take measures to reduce the cost of investing in the country and stimulate new businesses. Brazilian President Dilma Rousseff said earlier Monday that the South American giant was “300 percent prepared” to weather the eurozone crisis. “We will resist the crisis by creating jobs, by investing in infrastructure and social activities,” said Rousseff, who believes austerity measures alone will not solve the European debt crisis.

Inflation in Brazil reached 6.5 percent in 2011, the upper limit of the official target, but has tapered off in the first months of this year, meaning it could drop to or near the official target of 4.5 percent by the end of 2012.