Economy
Richard Surrey
Sep 1 2007

Mantega Lifts Brazil 2007 Growth Forecast to Up to 5%

Sept. 20th 2007 Brazil's government raised its economic growth forecast to as much as 5 percent this year on rising investment and household consumption, Finance Minister Guido Mantega said.

The economy may expand between 4.5 percent and 5 percent, up from an April estimate of 4.5 percent, Mantega told reporters in Brasilia while giving an assessment of the government's Accelerated Growth Program unveiled on Jan. 22.

The potential for faster-than-expected growth rests on lower interest rates and higher wages, which have expanded credit and increased consumer spending 5.7 percent in the second quarter of this year, the 15th straight quarterly increase, the government said in a statement distributed in Brasilia. Mantega kept unchanged the government's pledge to boost growth to 5 percent annually until 2010 even after a U.S. subprime mortgage rout eroded confidence in global economic growth.

The U.S. mortgage turmoil ``is probably the only threat to economic growth next year,'' Mantega said. ``But we keep our estimate of 5 percent growth with serenity, as Brazil hasn't been hurt by the crisis and may even benefit from it in the future.''

Mantega said the government also counts on the so-called Accelerated Growth Program to encourage more private capital in the country, as it aims to generate 504 billion reais ($269 billion) in public and private investment over the next four years.

Growth Program

The government spent only 1.37 billion reais of the 14.7 billion reais included in this year's budget for capital spending on the program, the statement said.

The government considered that 80 percent of the 2,014 investments covered by the program received a green light, or are developing at an ``adequate'' pace, while 10.4 percent received yellow light, or demand ``care'' and 9.7 percent received a red light, or developing slowly. In April, 52.5 percent of the investments received green light, 39.1 percent had yellow light and 8.4 percent had red light.

President Luiz Inacio Lula da Silva's government's approval rating fell to 48 percent in September from 50 percent in June, pollster Ibope said today. The poll also showed that 52 percent of Brazilians believe inflation will increase in the next six months, compared with 40 percent in June.

Ibope interviewed 2,002 people in 142 municipalities in the Sept. 13-18 period. The margin of error for the poll was plus or minus 2 percentage points. The survey was commissioned by the National Industry Confederation, the country's largest business guild.