Finance Ministry's estimate is for 3.5% growth in 2004

17/07/2003 - 23h26

Brasília, July 18, 2003 (Agência Brasil - ABr) - The Administration is awaiting the end of the year for the level of economic activity to recover and then move on to a significant level of growth in 2004, above the 3.5% set out in the proposal for the Budgetary Guidelines Law. For this year, the Administration continues to operate on the basis of a GDP (Gross Domestic Product) growth level below 2%. These estimates were released yesteray by the Ministry of Finance in July's Economic Conjuncture Bulletin.

In his comments about the Bulletin, the Finance Ministry's Secretary of Economic Policy, Marcos Lisboa, underscored the reduction in interest rates, the renewal of foreign loans to the private sector, price control, and the country's improvement on the international stage as the chief factors that will lead to growth in the level of economic activity.

According to the Secretary, the renewal of growth should occur around the end of the third quarter and during the last three months of the year. "There is always a delay between improvement in economic variables and recovery in the level of economic activities. There is no magic formula for this," he affirmed, emphasizing that improvement is also pegged to other factors, such as the international situation.

The Minister of Finance, Antônio Palocci, recalled that this year's performance reflects the crisis of confidence that hit the country at the end of 2002 and that the quest to renew growth will proceed gradually. "It will not be a process that produces overnight solutions. We always need to remain aware that we escaped a very large fiscal crisis," he said, reinforcing the conjunctural analysis released yesterday (17) that the renewal of growth depends upon a set of initiatives, including approving the reforms, the new bankruptcy law, and alternative ways to finance infrastructure projects, such as Public-Private Partnership (PPP).

In order for there to be sustained long-term growth, Lisboa suggested an increase in the rate of investment in capital goods, which has remained at the level of 20% of the GDP for the past 20 years."We need to move from this plateau to a level of investment that assures an economic growth level well above the level of populational growth," he contended.

According to the Secretary, sustained long-term growth requires an investment level on the order of 24% of the GDP, "as is observed in the emerging countries that have the highest growth rates."

Lisboa also commented that the measures adopted by the government in the area of tax and social security reform, presently under consideration by the National Congress, contributed to the improvement in the economic indicators and that changes introduced into the social security reform bill will not affect the outlook of confidence in the Brazilian economy. "The reforms are doing very well. They are undergoing fine-tuning," he remarked. (DAS)