OECD: Brazil’s fiscal deficit to reach worrying levels in 2010

The Organization for Economic Co-operation and Development (OECD) said Thursday that the tax cuts determined by the Brazilian government to handle the international financial crisis effects caused a higher fiscal deficit in the country, which will reach potentially worrying levels in 2010.

According to OECD, Brazil’s fiscal deficit will jump from 2 percent of the GDP in 2009 to 3.5 percent next year. The institution recommended a gradual decrease in the fiscal stimuli in 2010, in order to recover some of the resources.

OECD also projected that Brazil’s GDP will register zero growth in 2009, due to the crisis, but will have a 4.8 percent expansion in 2010, due to a sharp increase in the domestic market’s demand. In 2011, the country is expected to grow 4.5 percent.

The institution also stated that Brazil’s inflation rate will remain between 4 percent and 4.5 percent both in 2009 and 2010. The Brazilian government set for both years an inflation target of4.5 percent, with a 2 percentage point tolerance.

OECD has released projections for other countries as well: in 2010, Mexico is expected to recover from its recession and expand 2.7 percent. Chile is expected to grow 4.1 percent next year, while China is expected to grow 10 percent, and India to grow over7 percent. The developed countries are expected to grow 1.9 percent in 2010.

OECD gathers the 30 most industrialized countries in the world. The only Latin American member of the organization is Mexico, but both Chile and Brazil are candidates to join the institution.