BRASILIA/SAO PAULO (Reuters) - Senior members of Brazil’s government now believe the economy will expand less than the official 4.5 percent forecast this year and are bringing internal projections more into line with private-sector estimates of about 3 percent growth, four officials told Reuters.
Brazil’s economy is set to expand slightly above the 2.7 percent growth rate of last year despite a barrage of government actions to revive consumption and industry, and an aggressive cycle of interest rate cuts that is driving borrowing costs close to a record low.
Weaker growth could prompt President Dilma Rousseff to come up with even more measures at a time when Brazil’s economy is expanding at a slower pace than other Latin American countries. Most private sector economists have for months forecast that the economy will expand about 3.2 percent this year.
“Data is coming out weaker than what everyone expected, especially in the industry sector. Projections of growth of around 3.2 percent are more accurate,” said one of the officials, asking for anonymity.
Brazil’s manufacturing sector unexpectedly slid in March from February. Retail sales remain strong in Brazil, showing a growing disparity between industrial output and domestic demand.
The officials are confident that current measures such as tax and rate cuts will fuel an economic rebound later this year. Twelve-month trailing growth rates may accelerate to 5 percent in the third and fourth quarters from about 2.7 percent at the end of last year, some of the officials noted.
Some officials also believe the central bank’s aggressive rate easing cycle will also help bolster credit that has seen some weakness in recent months.
The central bank has trimmed 350 basis points off the benchmark Selic rate since August to 9 percent. The bank has signaled it could keep cutting some of the world’s highest interest rates to reach new record lows.
Writing by Alonso Soto; Editing by James Dalgleish