Growth in Q2 of this year grew to 1.5 percent, the fastest Q2 growth in three years. However, this growth is expected to be short lived with economists expecting growth in Q3 to slow significantly.
Growth in Q2 of this year grew to 1.5 percent, the fastest Q2 growth in three years. However, this growth is expected to be short lived with economists expecting growth in Q3 to slow significantly.
With an anemic growth of only 0.9 percent in 2012, 1.5 percent for this year's Q2 is good news. Unfortunately this growth is not expected to last. One of the hardest hit by the speculated tapering of QE, the Brazilian real has dropped 17 percent since May against the greenback. But it's unfair to put all the blame for the depreciating real on the prospect of QE tapering — social unrest earlier this summer in June and July, as well as underlying infrastructure and economic framework issues have contributed to the country's slow economic growth as well.
Although inflation dropped to 6.2 percent in August down from 6.7 in June, it is still too close to the 2013 ceiling of 6.5 percent set by the government for anyone to breathe a sigh of relief. Attempting to curb inflation, Brazil's central bank voted to raise the country's Selic interest rate half a point to 9 percent at the end of August. This makes the fourth consecutive interest rate hike for Brazil. The bank hopes that higher rates will limit the consumer price pressures that have resulted from the weakened real.
Some economists have advised a reduction in spending to help the ailing economy; unfortunately, politics is getting in the way of economic recovery. With the presidential election coming up in October 2014, political specialists note that budget cuts are unlikely before an election year.