Friday, June 4, 2010

Brazil To Assume 2nd Highest Global GDP Growth Rate

Next week Brazil will assume second place among the highest global growth rates in Q1, ahead even of China. The official data will only be disclosed by the Brazilian Institute of Geography and Statistics (IBGE) on Tuesday, but those are the projections of the financial market.

Itaú bank, for example, estimates a growth in Gross Domestic Product (GDP) of 3% in the first three months of the year, compared with the fourth quarter of last year. It is one of the highest projections of the entire market. On an annualized calculation - that is, assuming that the pace would continue for the rest of the year - this would be equivalent to growth of 12.6% in 2010.

To get an idea, China has expanded at an annual rate of 11.2% between January and March. The leader of the ranking should be India, which grew at an annual rate of 13.4%. The United States, still struggling to recover from the severe crisis that hit the country in 2008, grew 3%.

Ilan Goldfajn, Itau's Chief economist, notes that there is a risk that the Brazilian expansion in the quarter could be even stronger. According to the bank, considering the results for January, February and March this survey, growth in the quarter was 3.6%. He admits that even the analysts were surprised at the number. Therefore, they prefer a more conservative estimate.

Retreat Regardless of the position of Brazil in this hypothetical global ranking, the fact is that the expansion in the quarter was well above what almost all analysts had expected. Without a single exception, they project a slowdown going forward. Itaú himself believes that the pace of GDP growth will fall to 12% range to something like 4% or 5% in the last quarter of the year. This is what explains the projections for 2010 to a "lower" 7.5%.

Experts argue that in this scenario, the significant slowdown is welcome. Brazil, they say, can not grow at a rate above 4% or 5% in a sustainable manner - without a high inflation to levels above the target set by government and/or without opening a hole in the external accounts.

With content from Agencia Estado.

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