Brazil’s Latest Growth Projection for 2006: No More than 3.3%

 Despite optimistic projections by President Luiz Inácio Lula da Silva and Finance Minister Guido Mantega who are betting that Brazil will grow 4% this year, Ipea (Institute of Applied Economic Research) a branch of Brazil’s Planning Ministry, says that the Brazilian GDP will not grow more than 3.3% this year.

In fact, the Ipea has revised downwards most of its growth targets for 2006. In its previous forecast the Institute was anticipating a 3.8% GDP increase this year.

The Ipea’s quarterly bulletin published today, September 6, also downplays the growth of exports (from 5.3% to 4.5%), of imports (from 14.7% to 14%), of families expenditures (from 4.8% to 4.3%) and of investments (from 7.8% to 6%).

The forecast for services growth fell from 2.7% to 2.4% and the one for agriculture went down from 2.5% to 2.3%. As for industrial production the reduction was even more pronounced: from 5.3% to 4.2%.

The Ipea also revised downwards its inflation projection from 4.4% to 3.2%, way below the 4.5% target established by the government. According to the Institute, the Brazilian inflation  should top at 4.5% in 2007.

On the positive side, the Ipea increased its trade balance estimate from US$ 40.4 billion to US$ 43.6 billion for this year. This number should fall to US$ 40.1 billion in 2007, however.

The current account balance for 2006 also got a better outlook: instead of the previously projected US$ 8.4 billion, the Ipea is now expecting US$ 10.6 billion by year’s end.

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