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August 30, 2013 8:45 pm
Brazil’s economy will return to its former annual growth rate of about 4 per cent next year after it expanded at its quickest pace since 2010 in the second quarter, said Guido Mantega, the finance minister.
The optimistic note came even as analysts have warning that the economy would weaken in the second half of 2013 despite the strong performance in the second quarter, when it grew 1.5 per cent compared with the previous three months.
“A reduction in interest rates, taxes, in costs – all of that brought a level of dynamism to the Brazilian economy,” Mr Mantega told reporters.
The strong advance for GDP in the second quarter, which grew 3.3 per cent compared with a year earlier, was driven by exports, investment and the agricultural and industrial sectors.
The government, under political pressure after mass protests in June and with an election due next year, will be hoping the rebound proves sustainable.
However, economists said the second-quarter performance, Brazil’s best since the first quarter of 2010 when the economy grew at its fastest pace in decades, would be difficult to sustain, with business confidence falling in July.
The strong growth was well in excess of analysts’ forecasts of 0.9 per cent for the second quarter in a survey by Bloomberg.
“Given the first signs that the labour market is losing momentum, private credit supply is moving sideways, and sentiment is softening, consumption could remain weak, which adds doubts to the sustainability of investment,” said Guilherme Loureiro, a Barclays economist.
Exports in the second quarter grew 6.9 per cent compared with the previous three months, while imports rose only 0.6 per cent. This meant net exports added 0.8 percentage points to GDP growth during the period.
Mr Loureiro said he had been expecting 0.3 percentage points of growth from net exports, meaning that much of the surprise in the second-quarter GDP figure came from trade.
Investment, much needed in the Brazilian economy, remained strong, growing 3.6 per cent, while private and government consumption, the traditional drivers of the economy, grew only marginally. Agriculture, meanwhile, was up 3.9 per cent.
Mr Loureiro said he would revise up his GDP estimates for full-year 2013 following the second-quarter result to 2.7 per cent. But he pointed out that a seasonally adjusted fall in auto production of 6 per cent in July and an expected decline in industrial production in the same month would mean a weaker third quarter.
Alberto Ramos, an economist with Goldman Sachs, said growth could be flat in the third quarter, “dragged by the moderation in employment and real wage growth, the sharp decline in consumer and business confidence, and tighter domestic and more exigent external financial conditions”.
Mr Mantega said that while the government was confident the recovery was under way, it would not be revising its forecast for this year of 2.5 per cent for the time being.
“We will continue with our prediction of 2.5 per cent, with greater accuracy in our measurement by the end of the year,” he said.
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