Brazil’s gross domestic product (GDP) would grow 4-6 percent in 2010, while inflation would be reined in at about 4 percent, a Brazilian economist said.
The worst of the financial crisis was now over for Brazil, but its GDP in 2009 is expected to shrink by 0.8-0.3 percent because of poor economic performance in the first quarter, said Luiz Guilherme Schymura, director of the Brazilian Institute of Economy of the Getulio Vargas Foundation, in an interview with Xinhua on Thursday.
He estimated that the GDP in the last three quarters of this year would grow by about 1.5 percent, 1.9 percent and 1.9 percent respectively.
“I estimate the GDP will grow 4 percent next year, but I would not be surprised if it grows 5 or 6 percent,” said Schymura.
The National Consumer Price Index (IPCA), the inflation index used in Brazil, will continue to fall in 2010, he said.
The IPCA, which was at 5.9 percent in 2008, went down to 4.5 percent in July. Schymura predicted the IPCA would be further down to some 4 percent in 2010.
Brazil’s Central Bank set an inflation target of 4.5 percent for both 2009 and 2010, with a tolerance margin of two percentage points.
Schymura said inflation in terms of both durable and non-durable goods is falling and is expected to continue to fall.
“I believe the year of 2010 will be very positive for Brazilians. The economy will grow, the inflation will be low, and the local currency Real will likely appreciate against the U.S. dollar. The appreciation is good news for Brazilian consumers, as it means they can buy cheaper imported products,” he said.
“With this favorable economic scenario, the government will have a lot to say in next year’s presidential race. The government’s candidate will benefit from the positive economy, as well as from the salary rise of public employees,” Schymura said, referring to President Luiz Inacio Lula da Silva’s chief of staff Dilma Rousseff, who will run for the October 2010 presidential election.
But Schymura said the appreciation of the Real is bad news for the local manufacturing sector, which will face growing competition from cheaper imports.
The Real depreciated against the U.S. dollar in the fourth quarter of last year amid a critical economic situation. But this year the Real has appreciated about 20 percent against the dollar.
He estimated the Real’s appreciation trend would continue in the second half of this year.
As Brazil is increasing exports of oil and oil products, more dollars would flood into the economy.
Brazil, which is currently self-sufficient in oil, has discovered what is expected to be a huge offshore, deep-water, pre-salt layer of oil reserves. Production of light oil and gas from these reserves has started and is expected to continue in the coming years.
“It would be a wise policy to invest the oil exporting revenues in education, as it would raise the country’s long-term economic growth prospects,” Schymura added.