Mantega predicts Brazilian growth of 4%

Brazil’s economy is expected to have grown at an annualised rate of 4 per cent or above in the third quarter and is likely to maintain this pace through next year and into 2014, according to Guido Mantega, finance minister.
His prediction of a strong rebound in Latin America’s largest economy came as the central bank kept lending rates unchanged for the first time in more than a year after an easing cycle in which they fell to an all-time low of 7.25 per cent.
We will close 2012 with an economy in recovery and growth mode,” Mr Mantega said in a press briefing.
The expected recovery, which follows four quarters of marginal growth, comes as the government has launched a wave of stimulus measures to revive a flagging industrial sector.
The government has cut social welfare payments on salaries and introduced higher taxes on cars with imported components while overseeing a currency that has fallen about 10 per cent this year against the dollar.
The government’s statistics agency is due to announce the official growth rate for the third quarter ended September on Friday.
Mr Mantega said the economy was likely to have grown between 1 and 1.3 per cent during the third quarter compared with the second and was expected to expand at a similar pace in the fourth quarter.
“We will enter 2013 with a growth rate of 4 per cent and we will maintain this through 2013 and 2014,” Mr Mantega said.
The finance minister’s forecasts are in line with a Reuters survey of economists that predicted growth of 1.2 per cent in the second quarter.
However, his forecast for next year is more optimistic, with the Reuters survey projecting growth of 3.9 per cent in 2013.
Brazil needs to return to its longer-term trend growth rates of 4 per cent or more to make up for two years of lacklustre performance, with the economy expanding 2.7 per cent in 2011 and expected to have grown less than 2 per cent for full-year 2012.
Much of the slowdown has been caused by a contraction in Brazilian manufacturing as a strong currency and falling competitiveness have squeezed companies.
“This growth will come at a time when Europe is still resolving its problems,” Mr Mantega said of the economy`s recovery in the third quarter.
He said Brazil was becoming more dynamic with resilient consumer spending and low unemployment buoying the economy.
Part of the rebound has also come from moves by the central bank to cut its benchmark Selic rate by a total of 525 basis points from a recent peak of 12.5 per cent in August last year.
The central bank on Wednesday, however, kept the rate on hold and signalled it would remain that way for the foreseeable future.
“Considering the balance of risks to inflation, the recovery in domestic economic activity, and the complexity surrounding the international situation, the committee understands that maintaining a stable monetary policy for a sufficiently prolonged period is the best strategy,” the central bank said.
Nomura said the statement indicated Brazil had reached the end of the easing cycle.
“Rates will remain lower for a prolonged period of time,” it said interpreting the statement.

Source：http://www.ft.com,November 28, 2012 ,By Joe Leahy in São Paulo