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:
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.”