Brazil’s Finance Minister Mantega has recently called a “joke” Credit Suisse’s Brazil GDP forecasts of just 1.5% for 2012. But the Swiss bank is not alone in its bearish views. Many other economists have been revising down Brazil’s GDP recently as the economy  cools off. Capital Economics’ Neil Shearing has recently sent to clients a note on Brazil stating the following:

“With both external and domestic pressures building, we are nudging down our forecast for growth this year to just 1.7%, with only a modest rebound to around 3.5% likely in 2013.”

In addition to Brazil’s slowing domestic demand, Shearing cited China as the elephant in the room.

“China’s economy is more likely to disappoint on the downside than surprise on the upside. This, in turn, is likely to lead to further falls in commodity prices, which would expose the limits of Brazil’s consumption-led growth model.”

And he also mentions the over-indebtness of the Brazilian consumers:

“The boom in credit in recent years has left Brazilian consumers overstretched and the housing market overvalued. Against this backdrop, efforts to stimulate the economy may be less effective than in the past.”


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One Response to Capital Economics revises down Brazil GDP growth to 1.7% in 2012: “Efforts to stimulate the economy will be less effective”

  1. KB says:

    Since a long time ago I keep a daily series of what I call Domestic Ibovespa. It´s the Bovespa index consisting of all shares of companies targeting the domestic market. These shares have the same weights that they have in the Bovespa index. Currently it consists of half of the shares of the Bovespa index and accounts for 53% of its value. It has shown a stable correlation with the Brazilian GDP of 85% with lead time of one quarter.

    Three months ago it pointed out 2.0% annual growth in 2012 if the index would stay unchanged till the the end of the year. At the time I hardly believed in that forecast once it was completely out of consensus.

    I did not make another prediction but once the Domestic Ibovespa fell further since then, it appears to me that the Credit Suisse’s Brazil GDP forecast of just 1.5% for 2012 is very plausible.

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