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UPDATE 2-Economists cut Brazil 2012 economic growth view
August 13, 2012 / 11:46 AM / 5 years ago

UPDATE 2-Economists cut Brazil 2012 economic growth view

* Economists lower 2012 growth view to 1.81 pct

* Government to unveil new steps to spur growth

* 2012 inflation view up for 5th straight week

By Silvio Cascione

SAO PAULO, Aug 13 (Reuters) - Brazil will likely post faster inflation and weaker economic growth this year than previously thought, a weekly central bank survey of economists showed on Monday, reinforcing the case for added fiscal and monetary stimulus to spur economic expansion.

The median forecast for Brazil’s economic growth in 2012 was revised down to 1.81 percent from 1.85 percent previously, according to the poll, which tracks forecasts of the most widely watched indicators in Brazil.

That would be the weakest annual performance since 2009 and a sharp slowdown from stellar 7.5 percent growth two years ago.

Despite such slow economic growth, the outlook for inflation this year was up for the fifth straight week to 5.11 percent from 5 percent as food costs gain worldwide after a severe drought in the United States.

Market pessimism over the prospects of Latin America’s largest economy has raised urgency within the government for new measures to cut costs and spur investments. President Dilma Rousseff will likely unveil on Wednesday the auction of rights to operate roads and railways, and is working on plans to reduce taxes on electricity bills, government officials told Reuters.

Such steps would come on top of other measures such as targeted tax breaks, more subsidized state lending and a year of interest rate reductions. After reaching an all-time low of 8 percent, Brazil’s benchmark Selic rate will likely fall to 7.25 percent by year-end, according to the poll.

Economists in the central bank poll say inflation will quicken to 5.5 percent in 2013 and a Selic rate will rise to 8.5 percent.

Brazilian policymakers target inflation at 4.5 percent plus or minus 2 percentage points.

The poll results are the median forecast of analysts surveyed by the central bank at about 100 financial institutions, according to the central bank.

Consumer prices were seen rising 0.33 percent in August from the previous month, up from 0.32 percent seen a week earlier.

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