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IMF Sees Brazil Growing Faster in 2010 than Global Economy

October 1st, 2009

IMFBrazilian government’s measures adopted to counter the international financial crisis, which began in September 2008, are proving successful and have placed Brazil ahead of its Latin American counterparts when it comes to resumption of economic growth, which is growing above the world average.

The analysis is included in the report of the just-published International Monetary Fund (IMF), according to the Fund’s assistant director, Murilo Portugal.

“Brazil is heading the resumption of growth in Latin America, thanks to the strength of its economy, its solid banks, and the economic policies that were adopted to fight the crisis. The country had been implementing good policies, such as floating exchange rate, fiscal responsibility and a certain degree of inflation control,” explained the director.

The risk right now, according to him, is the possibility of a significant retraction of global trade, which he does not believe should take place, even though the issue of unemployment is expected to persist for a longer period in developed countries.

The IMF has revised its growth forecast for the world economy in 2010 from 2.5% to 3%. The estimate is also part of the report.

Portugal underscored that the data point to a gradual resumption of global growth, due more to the restocking of industry inventories than to rising consumption. According to him, banks are not yet fully capable to increase lending. As a consequence, the executive advises that fiscal stimulus and monetary system support policies be maintained.

By his forecast, Brazil is better equipped than the rest of the world to react to the effects of the crisis. “I believe that next year, Brazil will grow faster and stronger than the world economy.”

Portugal described as “very important” the consensus that was reached last week during the summit of the G-20 countries, in the United States. Emerging countries will have a stronger influence on the IMF, as 5% of the organization’s quotas will be transferred.

He informed that the inflow of funds into emerging countries has increased, having risen from US$ 14 billion, in 2007, to US$ 160 billion since September last year. Furthermore, lines of credit were established in order to help countries by means of preventive measures, as was the case with Mexico, Colombia and Poland.

Confidence in Economy

The Brazilian Industry’s Confidence Index (ICI), measured by the Brazilian Economics Institute (Ibre) of the Getúlio Vargas Foundation (FGV), has reached its highest score in the last 12 months, with growth of 3.6% from August to September 2009, having gone from 105.7 to 109.5 points.

This is the ninth back-to-back increase, but the index is still lower than that of September 2008 (115 points), when the international financial crisis worsened.

The survey also points to an improvement in both the expectations regarding the future of the economy and the present moment. The Current Situation Index (ISA) rose 2% and totaled 109.5 points. The Expectations Index (UE) went from 104 to 109.4 points, growth of 5.2%.

According to the FGV, the share of companies that declared to have insufficient inventories went from 4.6% to 5%, whereas the share of those that declared to have surplus inventory decreased from 6.5% to 4.5%.

Out of 1,125 companies interviewed for the survey, the majority (52.1%) believes that sales should rise over the next six months, and only 9.3% predict a worsening of business from September this year to February 2010. As of August, 46.2% were optimistic and 17.2% were pessimistic.


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