Apparently, the mixed economic forecasts are all over…

According to some analysts, the negative growth in the eurozone area this year will not prevent China and Brazil GDP growth to re-accelerate in 2013. In China’s case, the media in general agrees that the economic downturn is already taking place with GDP growth target lowered to about 8%. However, according to some (optimistic) analysts, the 2nd largest economy should recover in the second semester and get back to 9% growth by next year amid the latest discussed government stimulus.

According to others, Brazil will benefit from the alleged Chinese expansion in 2013 and can return to growth rates around 4% in 2013. In fact, the Institute of International Finance (IIF) goes further and predicts economic growth of 5.2% in Brazil next year. Here is what they wrote in their latest research note on Brazil:

“Policymakers are taking advantage of the global economic downturn to try to induce a lasting decline of interest rates. Achieving this goal will require strong coordination of fiscal, quasi-fiscal and monetary policies so as to support growth without eroding confidence and re-igniting inflation.

  • The central bank has cut its Selic policy rate and relaxed capital requirements on credit. Growth is gaining momentum, spurred by monetary easing, a tight labor market and improved consumer confidence. We expect real GDP growth to exceed 5.0% next year.
  • Given growing concerns over deindustrialization, the response to depreciation vis-à-vis appreciation forces has been asymmetric in an attempt to regain international competitiveness. The central bank has only sporadically sold dollars to counter depreciation pressures. Its response to appreciation of the real has been more forceful.
  • Overall, the economy is well positioned to withstand increased financial market volatility. This resilience stems from relatively robust external and fiscal positions. Large international reserves confer substantial firepower to support the real if necessary, while the public sector deficit and gross debt ratio are moderate.”
Cross your fingers…
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