Brazil Growth Picking Up in Next Quarters - Central Bank Head
08/17/2012| 01:18pm US/Eastern
SAO PAULO--Brazil's economy enjoys sound fundamentals for sustainable growth, with an economic expansion likely to pick up speed in the next few quarters, Central Bank President Alexandre Tombini said at a business conference Friday.
"Our financial system is solid and enjoys high levels of liquidity," he said. "These are natural conditions for generating jobs and increasing incomes. Growth will accelerate in the next few quarters."
Brazil's economy expanded by a disappointing 0.8% in the first quarter of 2012 against the same quarter of 2011. Although most economists are forecasting improved performance in the second half of the year, a consensus figure for calendar 2012 growth is now only about 1.8%. But economists also agree that growth will be substantially higher in 2013, possibly reaching 4.0%.
Mr. Tombini said continued expansion of consumer and business lending will help fuel the expected expansion. Increased credit, he said, has been made possible by lower interest rates.
"We at the central bank adopted timely measures to help counter effects of a global crisis on the Brazilian economy," he said.
The Brazilian Central Bank began a cycle of interest rate cuts in August of 2011. The bank's Selic base interest rate now stands at 8.0%, down from its 2011 peak of 12.5%. Most economists are expecting more interest rate cuts before the end of this year.
Mr. Tombini said continued job creation and rising incomes mean it will be safe for Brazil's banks to increase consumer lending as a way to fuel economic growth.
The central bank head also mentioned other forms of government stimulus, including tax cuts. He said Brazil's government is giving consideration to measures that would reduce tax charges for electric power. Lower electric power costs would help fuel an industrial expansion, he said.
-Write to Paulo Winterstein at email@example.com