Thaindian News

Rio de Janeiro, Dec 7 (IANS/EFE) The Brazilian economy stalled in the third quarter after eight consecutive quarters of growth, a sudden halt that the government both expected and considers “temporary” since it was caused by restrictive measures that have now been eliminated.

Brazil’s gross domestic product did not expand between the second and third quarters, though GDP in the July-September period was up by 2.1 percent over the same three months in 2010, the IBGE statistics agency said.

The accumulated growth of the Brazilian economy was 3.2 percent in the first nine months of the year, and 3.7 percent in the twelve months up to September.

Both Finance Manager Guido Mantega and private economists consider that, besides the discouraging global outlook, the slowdown in the third quarter was caused by restrictive measures the government adopted at the beginning of the year to halt inflation, such as higher interest rates and cuts in government spending.

“The government has been executing a policy of contraction with high interest rates and budget austerity, so that even a drop in GDP might have been expected in the third quarter,” Andre Prefeito, economist of the Gradual Investimentos company, told EFE.

“Another important element was the crisis in the Euro zone,” he said.

“The government didn’t step on the brakes too much. What was unexpected was how bad the international crisis got. It was a factor we didn’t expect,” Mantega said.

But the central bank began in August a process of gradual lowering of interest rates until they returned to last year’s level, while the government eased several restrictive measures and announced a series of incentives to raise consumption.

The measures now in force are intended to encourage the gigantic domestic market, motor of the Brazilian economy in recent years, to spark growth once again and make up for the downturn in external demand.

According to the government, the slight recovery in the third quarter will allow Latin America’s biggest economy to end the year with an expansion of close to 3.2 percent - short of the 3.8 percent that was forecast - and with an estimated growth of between 4 percent and 5 percent in 2012.

For their part, private economists consulted last week by the central bank predict a 3.09 percent growth for 2011 and of 3.48 percent in 2012.

Brazil’s economy grew 7.5 percent in 2010, its best performance in 25 years.

–IANS/EFE
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