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Brazil: General economic trends
2010-01-02
by www.goinglobal.com
Brazil is the largest market in Latin America, the fifth most populous country in the world (with 196 million inhabitants) and the tenth largest economy. With a GDP of 1.27 trillion USD, Brazil represents about half of South America’s geographic territory and accounts for approximately half of its economic output. The Economist Intelligence Unit predicts that Brazil’s GDP is likely to contract (for the first time in 17 years) by 0.4 percent this year, before recovering modestly to 3.2 percent next year. The 3.9 percent average annual growth projected for the next four years is significantly weaker than the 4.5 percent yearly average of the last four years. GDP growth in Brazil will mean that incomes will still increase over the next few years, but much more slowly than in the recent past. And in spite of high income inequality, relatively weak institutional effectiveness, and its burdensome tax regime, Brazil will be an increasingly attractive market. Thus, while the global economic crisis and subsequent increasing unemployment in the developed world will likely have a strong negative impact on Brazil's economy in the near term, in the longer term its reduced external vulnerability may help the country cope with the global economic downturn.
The strong state influence of Brazil’s banks on the financial sector and the very expensive bank loans that held it back in the past have turned out to be a benefit in the current economic environment. Recent research by Goldman Sachs rated state involvement in banking as a plus. But, while Brazil has so far been spared the worst of the financial upheaval, its economy is nonetheless weakening. Job growth of recent years has reversed, and unemployment is currently about 8.5 percent, according to Instituto Brasileiro de Geografia e Estatistica (IBGE).
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