Brasília – Data culled from the industrial survey for the second quarter indicate that in coming months, the Brazilian economy is expected to continue growing – but at a much lower rate than in the first quarter this year. The survey was disclosed today (28th) by the National Confederation of Industries (CNI).
The executive manager of the CNI’s Research Unit, Renato da Fonseca, underscored that there was strong growth in the first three months of 2010 as a result of measures implemented by the government in order to overcome the international financial crisis. However, according to him, the economy is not overheated, as the Brazilian Central Bank had forecasted.
“This is not taking place, obviously, because of the withdrawal of demand stimuli,” he explained. According to Fonseca, the withdrawal of incentives led the industry to cool down, because the demand decreased. Other factors include the low rate of exports and the strong inflow of imported products, which compete with domestic production.
He underscored that the expectation for economic growth to cease, but rather to decline, as long as the production chain is kept going. For such, according to the CNI, care must be taken with the Central Bank’s strategy of holding back the demand simply by increasing the interest rate.
To Fonseca, the ideal scenario would be a combination of monetary and fiscal policy, because without investment there is a risk of reversal of the optimism shown thus far by Brazilian businessmen.
“The interest rate policy has been implemented in order to reduce the demand, because there was fear that it might get too strong. However, the industry having no problems in meeting the rising demand, inventories are not dropping,” he stated. “This policy [of increasing the interest rate] ends up reflecting directly on investment, and without investment there is no supply ,” he said.
*Translated by Gabriel Pomerancblum
