OECD increases Brazilian growth expectation for 2010 and 2011
Folha de S. Paulo
The Brazilian economy is showing greater recovery capacity than it was expected a few months ago, reason why the OECD (Organization for Economic Cooperation and Development) reviewed the country's growth forecast to 6.5% in 2010 and 5% in 2011. The numbers appear in half-yearly report of perspectives published this Tuesday by the entity. Compared to the estimates of November of last year, the expectation for 2010 is 1.7 point higher, while that for 2011 increased five tenths.
Even though the Brazilian economy shrank 0.2% in 2009, since the middle of said year the recovery has been impressive, and the Gross Domestic Product (GDP) in real terms was already above level prior to the crisis, stresses out the OECD. Among the main reasons for the improvement are the monetary and the fiscal incentives that favored the investments and the private consumption, causing, for instance, an increase in the imports. The country also benefited from the participation in the cycle of reconstitution of reserves of companies and from the high prices of the raw materials it exports. According to the authors of the report, the short-term indicators continue confirming the idea that internal demand is the factor that is heating up the Brazilian economy in the first half of 2010.
The OECD estimates the good behavior of tax collection will allow fulfilling the goal of a surplus of 3.3% of the GDP, both this year and the next, with the subsequent reduction of the public debt. In any case, the "Club of developed countries" warns that regular public spending shall weigh in the budget on the long-term, and therefore it asserts the Brazilian authorities should "rapidly" call off the incentives started to face the crisis. "The announcement of cuts in the expenditure of a total equivalent to 1% of the GDP in the 2010 budget is a step towards such direction", it points out after stressing out that, even though some tax exemptions have already disappeared, certain measures of incentive will remain in force until the October presidential elections.
Although the authors of the report admit the lifting of such measures may slow down the private demand, they insist this will be a "temporary" effect, and that it will be more than cancelled by the programs of infrastructure and in the field of energy foreseen for 2011. The OECD observes the strong recovery of the economic caused inflationary pressures to arise, and that the evolution of the prices, in annualized terms, is half point percent above the value marked as intended by the Central Bank. Nevertheless, the organization considers inflation has touched its ceiling and is now at a "tolerance bracket" that does not jeopardize the monetary policy guidelines. Specifically, it calculates the consumer price index, after getting to an average of 4.3% in 2009, will climb up to 6.2% in 2010, in order to stay at 5% in 2011.