Brazil: Strong demand growth
GDP growth picked up in the first half of 2007. Private consumption continues to support activity on the heels of strong credit increases and rising incomes. The expansion of investment has been particularly sharp. Export performance remains robust. But a vigorous pickup in imports, especially of capital goods and intermediate inputs, is beginning to weigh on the trade surplus. Inflation remains well below the central target, despite an uptick in mid-year on the back of food price hikes.
A two-year cycle of monetary easing was interrupted in October owing to the strength of demand growth. A fiscal impulse is expected at year-end and into 2008 due to an unexpectedly back-loaded execution of investment commitments from the pro-growth policy package announced in January 2007. The policy mix is by and large supportive of continued expansion over the projection horizon. But current public expenditure growth should be reined in over the medium term.
No. 264/265, December/January 2008
• OECD Economic Outlook No. 82, December 2007
• Visit www.oecd.org/brazil
• All OECD Observer articles on Brazil