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Brazil's Government Sees 3% Growth in 2015

Brazil's Government Sees 3% Growth in 2015

08/28/2014

 By Paulo Trevisani 

BRASILIA--The Brazilian government unveiled its budget bill for 2015 on Thursday that included a forecast for economic growth of 3% and inflation of 5% for the year.

Brazil's congress now has until Dec. 31 to approve the 2.86 trillion Brazilian-real ($1.27 trillion) proposal. The budget might have to be implemented by a new government, as recent polls indicate that President Dilma Rousseff's odds of re-election in October are diminishing.

The budget is based on a growth forecast for gross domestic product that may seem optimistic, considering Brazil's recent track record. GDP increased 1% in 2012 and 2.5% in 2013, and a weekly survey of economists by the country's central bank puts growth at less than 1% this year and at 1.2% next year.

The expected improvement is based on hopes of stronger recoveries in the U.S. and Europe, among other factors, Finance Minister Guido Mantega said.

"The problems we had this year won't happen again next year," he said to reporters. "This year we had a drought that pressured inflation, but it won't happen next year, it isn't possible that Brazil will have a drought again," he said.

Mr. Mantega also said he doesn't expect a repeat of the market turbulence in 2014 caused by the unwinding of stimulus policies in the U.S. Earlier this year, the Brazilian real lost value as global investors feared that emerging-market currencies would weaken as the Federal Reserve reduced its bond-buying program. The weaker real has also added to price pressures.

A series of increases to government-controlled prices, such as electricity and gasoline, also bode ill for inflation in 2015, economists say. Consumer prices have been increasing at an annual clip of about 6.5%, and the central bank raised its benchmark interest rate over the course of a year to 11% from 7.25% in a still-unsuccessful attempt to bring the rate down to the bank's 4.5% target.

The 2015 budget includes a 114.7 billion-real target for the government's primary surplus, which is the balance of revenue minus all spending except interest payments. The primary result is seen as an indicator of the government's ability to control spending, which economists consider important for a country struggling to tame inflation.

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