Finance Minister Guido Mantega revised Brazil’s economic growth forecast for this year to two percent Thursday, from an earlier estimate of three percent. The downgrade comes as a response to Brazil’s continuing struggle with an economy that has stagnated over the past 18 months, growing just 2.7 percent in 2011, down from 7.5 percent in 2010, as it faces shockwaves from the global economic crisis and China’s economic slowdown.
Brazil cut its benchmark Selic interest rate to a record low of eight percent Thursday, in an attempt to boost an economy that has continued to falter in the face of various stimulus measures. The 0.5 percent cut was the eighth consecutive reduction from the central bank’s monetary policy board (Comitê de Política Monetária), known as Copom, since August 2011, when the rate stood at 12.5 percent.
Despite a raft of recent stimulus measures, data released last week showed Brazilian industry continuing to perform poorly over recent months, as it reacts to the crisis in Europe and lower global demand for commodity exports. Industrial production shrank in May for the third consecutive month according to data released by the Instituto Brasileiro de Geografia e Estatística (IBGE).
Wary of dependence on the dollar, Brazil and China on Thursday agreed to a R$60 billion currency swap, shoring up their economies and increasing liquidity in the wake of continued instability in Europe and the United States.