Brazil reports signs of economic downturn

After the record growth of 7.5 percent in 2010, Brazil has started to show economic fatigue in late 2011. Consumer spending in the biggest economy of Latin America has declined in the third quarter, followed by a 0.04 percent dip in gross domestic product (GDP). Imports have also recorded a slump. Brazilian economy is expected to be just around 3 percent or even less this year.

To revive its consumer spending and maintain long-term growth, Brazilian government has recently introduced a fiscal stimulus package. Bank interest rates have also been slashed three times in the recent months. This is a major turnaround from measures adopted earlier this year by the Brazilian government to ‘cool’, an ‘overheating economy’. At that time, the government of Brazil had repeatedly hiked bank interest rates and taxes to keep a check on inflation.

Despite the recent downturn, Brazil boosts of an impressive foreign currency reserve of $352 billion. As on October 2011, unemployment rate is at a record low of 5.8 percent compared to average unemployment rate of 9.95 percent between 2001 and 2010. Brazilians feel that unlike other countries that have structural defects, Brazil is going through a transitional phase. All it needs is sufficient infrastructural development and skilled manpower to stay on the growth path.