Reuters: US Dollar Report: UPDATE 2-Brazil cbank cuts 2012 trade, profits payments view

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UPDATE 2-Brazil cbank cuts 2012 trade, profits payments view Jun 22nd 2012, 17:14 Fri Jun 22, 2012 1:14pm EDT * Central bank cuts trade flows, profit repatriation views * Current account deficit $3.5 bln in May as expected * Brazil attracts $3.7 bln in FDI, cbank maintains 2012 view By Tiago Pariz and Alonso Soto BRASILIA, June 22 (Reuters) - Brazil's central bank on Friday chopped its forecasts for trade, profit remittances and its current account deficit in the latest sign that policy-makers are dimming their expectations for economic expansion this year. The bank lowered its 2012 current account deficit forecast to $56 billion from $68 billion, s aying this owed to reduced expectations for imports, exports and repatriation of profits and dividends by foreign companies in Brazil. "The main point here is that these forecasts' revisions reflect a big change in the central bank's view of the Brazilian economy," said Luis Otavio de Souza Leal, chief economist at Banco ABC Brasil in Sao Paulo. Next week the central bank is expected to unveil its quarterly inflation report with revisions to its annual inflation and economic growth forecasts, which were not covered in Friday's central bank statement and press briefing on current account projections. In March, the central bank forecast of 3.5 percent economic growth this year, substantially higher than that seen last week by many economists at financial institutions surveyed by the central bank. This week, some private analysts cut their 2012 economic expansion forecasts to under 2 percent. Still, President Dilma Rousseff's administration insists Brazil, the world's sixth-biggest economy will expand faster than the 2.7 percent growth rate it posted last year. Finance Minister Guido Mantega on Wednesday went so far as to say a Credit Suisse forecast for 1.5 percent growth was a "joke." The bank posted a Brazilian current account deficit of $3.468 billion in May, in line with analysts' expectations, and a narrower gap than in the preceding months. The current account, the broadest measure of a country's foreign transactions in its balance of payments, encompasses trade in goods and services, interest payments and profit and worker remittances. The measure indicates how reliant an economy is on financing from foreign capital. While narrower current account deficits are seen as healthier for an economy, since it signals less dependence on foreign capital inflows, the projections for a narrower 2012 current account deficit indicated a less dynamic view of Brazil's economic transaction with the rest of the world. By far, the biggest chunk of Brazil's current account is f oreign trade. In Friday's projections, the central bank cut its 2012 export forecasts to $258 billion from $268 billion. I mports were seen at $240 billion, down from it s ea rlier forecast of $247 billion. Profit remittances, or earnings by foreign business in Brazil which are sent home to their headquarters abr o ad, were seen at $28 billion this year from an earlier forecast of $38 billion. Rousseff and central bank chief Alexandre Tombini have unleashed a wave of monetary and fiscal stimuli in a bid to revive an economy that has practically stalled since mid-2011. The economy has shown little evidence of perking up substantially in response. A debt crisis in Europe that threatens to tip the global economy into recession has hit the Brazilian economy by curbing demand for local products, including minerals and food, of which Brazil is a top producer, and dampening foreign investors' appetite for local equities and debt. FDI VIEW REMAINS STRONG The central bank maintained its forecast for foreign direct investment unchanged at $50 billion in 2012 as the country gears up for the 2014 soccer World Cup and 2016 Summer Olympics. Foreign direct investment, which has slowed in recent months, came to $3.716 billion in May, the central bank said, down from $3.973 billion in May last year and below the $4.669 billion reported in April. The repatriation of profits and dividends by foreign companies in Brazil has also slowed. Remittances of profits abroad sank to $2.55 billion in May from $4.2 billion in the same month a year ago. Brazil's 12-month current account deficit through May equaled 2.11 percent of gross domestic product, the central bank said. Link this Share this Digg this Email Reprints

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