Brazil Economic Growth Slow in 2014: IMF

RIO DE JANEIRO — Despite it playing host to the World Cup, Brazilian growth will continue at a slow pace in 2014, the IMF said in its quarterly report Tuesday.

The international lender lowered its annual growth forecast to 1.8%, compared to 2.3% in January.

Growth will be slower than once expected because of weak infrastructure and low private investment reflecting a lack of confidence in industry, the International Monetary Fund said.

In 2013, Brazil’s GDP grew just modestly for the third year in a row at 2.3%, compared to a torrid 7.5% in 2010.

As it prepares to host the World Cup, the Brazilian government’s own growth forecast is slightly more optimistic 2.5%, while its central bank foresees expansion of 2%.

The IMF also lowered Brazil’s 2015 growth forecast to 2.7%, having predicted 2.8% in January.

Growth Below South America’s

Brazil is South America’s economic giant, but growth at 1.8% is lower than that of the continent as a whole, which the IMF forecast at an average of 2.3%.

Highlights in the region include Peru at 5.5% growth, Colombia at 4.5% and Chile at 3.6%.

Argentina’s economy will expand just 0.5% and Venezuela’s will contract, by 0.5%.

Inflation, a constant worry of the Brazilian government which aims to hold it at 4.5%, will remain high, says the IMF, which puts it under the upper limit of 6.5% set by the Brazilian authorities.

With monetary reforms and a rise in the benchmark interest rate enacted last year, inflation should stay under control in 2014 at 5.9%, compared to 6.2% last year.

In 2015 in should go down to 5.5%, the IMF says.

The benchmark interest rate was set at a minimum of 7.25% until April 2013.

But rising inflation has prompted the South American giant to urge its central bank to toughen its monetary policy.

On April 2, it raised its benchmark lending rate for the ninth straight time by 0.25 percentage point to 11% per year.

In late 2014 it is seen as standing at 11.25% and 12% in 2015, analysts say.

On March 24, ratings agency Standard and Poor’s cut by one notch Brazil’s rating, from BBB to BBB-, citing weak economic growth and budgetary overruns.

Brazil said this was unjustified given what it called the country’s underlying economic strength.

The IMF said GDP growth will slow dramatically in Venezuela, going from 1% in 2013 to -0.5% this year and -1% in 2015.

Inflation stood at 40.7% last year and will continue to rise in 2014 to 50.7% at the end of the year, although it should slide back to 38% in 2015, the IMF said.

By: Agence France-Presse
Copyright Agence France-Presse, 2014