Country to grow up to 7% in 2010, foresees FGV
Folha de S. Paulo
The growth of the GDP (Gross Domestic Product) for next year should vary from 4.5% to 7%, according to a projection of the Ibre (Brazilian Institute of Economics), of the FGV (Getulio Vargas Foundation). According to the analysis of the institution, a growth of 7% would result from a V shape recovery, "in which the intensity of the resumption is equivalent to the contraction occurred in the turn of year 2008 to 2009". "The growth of 7% (of the GDP) is not, anyhow, unthinkable".
The Letter of the Ibre indicates that the Brazilian economy is resuming the "exuberance" of the level of activity seen in the pre-crisis period. The most consistent expansion in 2010, however, may bring the greatest challenge to the Brazilian Central Bank since the implementation of the inflation goals system, in 1999.
In the analysis of the Ibre, in case the economy moves on towards a growth rate near 7% next year, the BC "will face the uncomfortable situation of having to step on the brake of the monetary policy amid the election campaign". The scenario of 4.5% would, however, provide the Central Bank more peace allowing it, without the ghost of the inflationary pressure, to keep the basic interest rate at 8.75% a year. Among the factors that should stimulate the economy in 2010 is the increase of the minimum wage. According to the current rules, the readjustment should be done according to the inflation rate of the year plus the GDP growth rate of the two prior years, increasing the minimum salary to R$ 505.90 (US$ 281.1).
For the first time since the end of March, economists asked by the Central Bank expect a positive GDP variation in 2009. According to last week's Focus survey, the projection is of a growth of 0.01%. In the previous week, the forecast was of zero variation of the GDP. Since March, however, the market had been forecasting retraction in the economy. In relation to the Selic rate, the forecast for 2010 was increased by the second consecutive week, going from 9.50% a year to 9.75%. For 2009, it continued at the current 8.75%. The projection for the IPCA (Extended Consumer Price Index) has reached 4.31% for this year.