Brazil sees strong growth, low inflation

Fri Jan 29, 2010 2:40pm EST
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By Martin Howell and Krista Hughes

DAVOS, Switzerland (Reuters) - Brazil's top finance official painted a rosy picture of an economy that was growing strongly enough for the government to remove some stimulus measures but was not getting so overheated that inflationary pressures were becoming a problem.

Talking during the World Economic Forum in Davos, Finance Minister Guido Mantega also said that he was pleased that the real currency had fallen about 7 percent against the U.S. dollar this year, though he indicated he expected a further decline.

"The Brazilian economy is undergoing growth which is sustainable growth and is not going to generate inflation. I don't see any signs of inflation," he told a news conference.

That meant the government didn't need to cut fuel taxes or take other such anti-inflationary moves, he told Reuters in an interview.

Mantega confirmed Brazilian media reports that the government had no plans to renew tax breaks that have helped automakers and home appliances manufacturers boost sales as there is no need for the additional stimulus.

"We are reducing the stimulus now because the economy is recovering fast and I think that they don't need more governmental help," he told Reuters.

Mantega said that Brazil's internal demand was growing at a 7 percent annual rate and that the overall economy was forecast to grow at 5 to 5.5 percent this year.

A reduction in industrial taxes on household durable goods such as washing machines will end this weekend, and tax breaks on cars at the end of March, he said.   Continued...