Brazil´s Growth to Pick Up Next Year

Brazilian central bank president Henrique Meirelles said the country´s rate of economic expansion would accelerate next year and that growth is now “sustainable.”

South America´s largest economy grew 3.9 percent from a year earlier in the second quarter and 2.8 percent in the first quarter, slowing from 4.9 percent growth last year.

Brazil´s central bank in the nine months through May raised the benchmark interest rate 3.7 percentage points to 19.7 percent, the highest since October 2003, to stem inflation. It cut the rate by a quarter of a percentage point on September 14 to bolster growth.

The country´s budget deficit in the 12 months through August widened to the equivalent of 2.9 percent of gross domestic product from 2.7 percent of GDP in July. The government forecasts the shortfall will widen to 3.6 percent of GDP by yearend, up from last year´s record low 2.7 percent of GDP as interest-rate increases by the central bank drive up borrowing costs.

The International Monetary Fund predicts the world economy will slow to 4.3 percent growth this year from 5.1 percent in 2004. Growth is expected to remain at 4.3 percent in 2006, the fund said in its World Economic Outlook last month.