Brazil finance chief says economy to pick up after slow start

Aug 06 2014, 06:15 IST
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SummarySlowing inflation and an expansion in credit, as well as a recovery in mining and oil output, should help Brazil's economy, says Guido Mantega.

The Brazilian economy should pick up in the second half of the year after a slow start and hit more "reasonable" growth levels in 2015, Finance Minister Guido Mantega told Reuters on Tuesday.

Slowing inflation and an expansion in credit, as well as a recovery in mining and oil output, should help an economy that was dragged down by high interest rates and a string of holidays during the first half of 2014, he said.

"We have a more favorable outlook and see quicker growth in the second half of the year," Mantega said. "Although 2014 will be a sort of transition year for us and for everyone in the world, we believe that we have the conditions to grow more next year."

Mantega, who is Latin America's longest-serving finance minister, said the decline in inflation should also allow Brazil's central bank to ease monetary policy next year.

In the past, Mantega has been criticized by market economists and some of his own colleagues for overly optimistic forecasts that they say have damaged the government's credibility.

Using a more sober tone, Mantega said the recovery ahead would be gradual and that the Brazilian economy will not immediately see the 4 percent annual growth rates that made it a Wall Street darling in the past decade.

Three years of subpar economic growth and stubbornly high inflation have dented the popularity of President Dilma Rousseff as she seeks re-election in October. Her rivals say the leftist leader has eroded Brazil's strong fundamentals since she took office in 2011.

FUEL ADJUSTMENT

Prices in Brazil have eased on a monthly basis since March, but 12-month inflation rose to the 6.5 percent ceiling of the government official target in June. The government's inflation target is the middle of a 2.5 to 6.5 percent tolerance band.

Mantega, who declined to confirm whether he will stay on after eight years in the job if Rousseff is re-elected, ruled out any sharp increases in the price of electricity and fuel next year as inflation pressures subside.

But he signaled that authorities could hike fuel prices later this year. Brazil has not yet raised gasoline prices in 2014.

"Every year we adjust fuel prices ... that's the rule," he said when asked if fuel prices could be raised this year.

The market expects the government to increase energy prices next year after keeping them artificially low for more than a year, stoking already high inflation.

Many economists also say the Brazilian economy

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