Domestic demand may cause Brasil to grow 7% this year, says creator of Bric
Valor Econômico
Brazil may reach growth near 7% in 2010 due to the "exceptional" strength of the domestic demand, assesses the head of international economic research of Goldman Sachs, Jim O'Neill. "Brazil is taking advantage of the strong policies adopted during the crisis and the benefits accrued by having kept inflation low in recent years", said O'Neill, creator of the Bric concept (which also gathers Russia, India and China). The British Economist does not consider a reason for great concern the recent turbulence in the international market, caused by the fear Greece defaults and its effects on other countries of Europe, maintaining the estimates that the global economy will have strong growth in 2010, driven by the Bric.
In an interview granted by e-mail on Thursday 11, O'Neill said he sees growth of nearly 6% this year as "highly likely", "possibly near 7%". Formed by household consumption, Government consumption and investment, the domestic demand will be the great engine of the Brazilian growth this year, according to him. O'Neill will attend the opening of the conference "A Bric's agenda", which will be held in Rio on the 22 and 23, organized by the municipal government of Rio de Janeiro.
O'Neill said the main reason for his optimism regarding the economic perspectives of Brazil in the coming years is the low and stable inflation. "This is really a new phenomenon for Brazil and it is changing the lives of 200 million people in the country. It is something that has led to the development of a rapidly growing middle class". The Economist minimized the volatility that took over the markets in recent weeks. "I think what will happen with the Chinese monetary policy and the American economy is much more important for the global markets than the issue of the Greek possibility of debt payment failure. Greece is only 2.5% of the Euro zone. The matter of contamination is important for the European Monetary Union, but it is not so important for the world as the Chinese policies and the USA".
According to O'Neill, the increase in the price of the US Dollar and the depreciation of the Euro in progress are not very relevant for the Bric. There should be some fast outflow of money from the currencies and markets of those countries, which, for him, opens "purchasing opportunities". He points out another point that seems more important to him. "I think China may be close to allowing some recovery of its currency". Should that occur, it may be good for Brazil and for the Bric markets in two ways, assesses O'Neill. First, it may allow the monetary tightening in China end sooner - after all, the increase in the value of the currency helps holding back inflation - and it is good for the Chinese consumers, as their purchasing power increases.
Goldman Sachs foresees global growth of 4.4% in 2010 and 4.5% in 2011, in both cases above what the bank considers the level of potential growth of the planet (that which does not lead to acceleration of inflation), of 4%. O'Neill said that during the period of volatility in the markets, in the recent weeks, there were several "exceptionally strong" global indicators. Should there be any possibility of change in the forecasts of Goldman Sachs at the time is upwards, not down, he said.