Brazilian Economic Outlook in 2011

Always at the beginning of the year the market is reached by a storm of predictions about how the year should be. To confirm this phrase I will begin this post with an interview that I watched yesterday with Eike Batista @ RedeTV where he talks about the Brazilian economy.

The interviewer start asking about what are the scenario for the brazilian economy for 2011 and what would be the good and bad news. "The positive part I think that the Brazilian economy will keep growing above the american and european standards, this is very important. However, there are several points that we need to control. I dare to say that the GDP would grow between 4 to 5% in 2011 (...). Obviously this several points such as infrastructure and skilled worker are pressing the inflation up." says Eike Batista. As businessman, the market also predict that Brazilian GDP will grow less compared to 2010 from 7,5% to 4,5% in 2011 due to a  number of factors including the increase of the SELIC benchmark interest rate to hold the inflation in its target defined by the Brazilian Central Bank. Speaking of Central Bank, Alexandre Tombini,on his first speech as the new president of the institution said that the current inflation target of 4,5% for 2011 and 2012 should be reduced.

Back to the interview, the interviewer asked Eike about the valued local currency against a basket of currencies especially the dollar and Eike answered: "There are a few industries in our economy that need sort of a help such as lower tax; on the other hand the valued currency can help companies to become more efficient because they can buy for a cheaper price machines and tools that are just fabricated abroad (....)".

If you would like to watch the full interview, please click here.

It is impossible to talk about scenario without citing the Public sector net debt. Tulio Maciel, Deputy Head of Economic Department of the Central Bank announced the increase in the forecast for the level of net public sector debt relative toGross Domestic Product (GDP) in 2010 but he also point to the fact that the trajectory of the indicator has been falling over recent years. For 2011, thecourse must be repeated, since theofficial forecast for Central Bank is that the debt will drop to37.8% of GDP at the end of next year.

I will keep updating the brazilian economic outlook for you readers.