Brazil’s economy last year registered its second-worst performance since 2003 as higher borrowing costs and a currency that rallied to a 12-year high led it to underperform emerging-market peers China and India.
Gross domestic product expanded 2.7 percent even after growth accelerated in the fourth quarter, the national statistics agency said today in Rio de Janeiro. The median estimate of 32 economists surveyed by Bloomberg was for the economy to grow 2.8 percent.
The GDP figure underscores central bank President Alexandre Tombini’s view that the economy is growing below capacity amid Europe’s debt crisis, reinforcing bets that the central bank may accelerate the pace of interest-rate cuts tomorrow. Growth in Latin America’s biggest economy will gain speed and grow 4.5 percent this year, Finance Minister Guido Mantega said today.
“Brazil is losing international competitiveness,” John Welch, chief strategist for CIBC World Markets, the investment- banking arm of Canada’s fifth-largest bank, said by phone from New York. “They’re blaming all the problems on the exchange rate, but have ignored structural reforms.”
After a 7.5 percent expansion in 2010, Brazil’s growth last year trailed India and China -- its peers in the BRIC group of large emerging markets. Growth in the $2.4 trillion economy also lagged the International Monetary Fund’s forecast of 4.6 percent average growth in Latin America last year, while exceeding the 1.6 percent expansion forecast for advanced nations.
Rate Outlook
Economic expansion slowed as the central bank increased rates through July to combat inflation. Even though policy makers have since reversed course, cutting the Selic rate by 2 percentage points to 10.5 percent to shield the country from Europe’s debt troubles, Brazil’s inflation-adjusted benchmark rate, at 4.3 percent, remains the highest among the Group of 20 richest nations.
Inflation will slow toward policy makers’ 4.5 percent target this year, even as the economy accelerates, Central bank President Alexandre Tombini said in a statement.
Brazil will offset the impact of slower global growth by maintaining a weaker exchange rate, lowering interest rates and taking other steps to stimulate the economy, Mantega told reporters in Brasilia today.
The government will use an “infinite arsenal” of measures to prevent the currency from appreciating, Mantega said.
Global stocks fell for a third day, the longest stretch in two months and commodities retreated as concern mounted the global economy is slowing. The Stoxx 600 Europe Index (SXXP) slid 2.7 percent, extending yesterday’s 0.6 percent decline.
Europe’s economy contracted 0.3 percent in the fourth quarter, the European Union’s statistics office said today, following data yesterday that showed U.S. f