Ex­pert sees China’s growth lift­ing Brazil’s econ­omy

China Daily (Hong Kong) - - BUSINESS -

BRASILIA — China’s bet­terthan-ex­pected eco­nomic growth is hav­ing a pos­i­tive im­pact on Brazil’s oth­er­wise flag­ging econ­omy, es­pe­cially in the pri­mary prod­ucts sec­tor, said a lead­ing econ­o­mist.

Jose Luiz Oreiro, pro­fes­sor of eco­nom­ics at the Univer­sity of Brasilia, said he be­lieves China’s 6.9-per­cent GDP growth in the first half of 2017 has helped lift Brazil out of its eco­nomic dol­drums.

“In the first quar­ter, the only sec­tor that saw real growth in Brazil was agribusi­ness with a 13-per­cent in­crease,” said Oreiro, ad­ding that “steel also has rea­son­able prices due to China’s growth, so China’s added growth has been good news for the Brazil­ian econ­omy.”

As to China’s eco­nomic in­di­ca­tors an­nounced last week, the econ­o­mist said, “The re­sult does not sur­prise me. We ex­pected to see a more mod­er­ate growth in China com­pared to pre­vi­ous years (with a dou­ble-digit growth), so the 6-7 per­cent growth per year is a new nor­mal.” per­cent

China’s eco­nomic growth helped sus­tain the prices of Brazil’s com­mod­ity ex­ports, off­set slow­downs in other sec­tors of Latin Amer­ica’s largest econ­omy, and also sig­naled a com­ing re­cov­ery for the global econ­omy, which has been strug­gling since the 2008 fi­nan­cial cri­sis, said Oreiro.

“The global econ­omy ap­pears to be getting into third gear. The de­vel­oped economies are see­ing sped-up growth. As the world’s sec­ond-largest econ­omy, China’s ac­cel­er­at­ing growth is im­por­tant in pro­vid­ing a greater im­pe­tus to the global eco­nomic growth,” said the econ­o­mist.

How­ever, the main chal­lenge for China will be to re­duce its “huge sav­ings rate” to sus­tain a new growth model that re­lies more on do­mes­tic con­sump­tion.

Oreiro said: “China will have to put in place so­cial se­cu­rity poli­cies, state-paid pen­sions, a uni­ver­sal pub­lic health sys­tem, et cetera, to re­duce the sav­ings rate and pro­mote spend­ing, since the Chi­nese mid­dle class will no longer need to save for med­i­cal treat­ment and thus will buy more con­sumer goods.

“It is the tran­si­tion China needs to com­plete, so that its con­sump­tion will rep­re­sent a larger GDP share. In re­cent decades, the Chi­nese econ­omy has been driven by in­vest­ments and ex­ports, now it needs to give a greater role to spend­ing.”

The out­look for Brazil’s econ­omy re­mains “very bad” though a slight growth was regis­tered in the first quar­ter of 2017, thanks to a bumper har­vest of soy and grains, Oreiro said, ad­ding that “the ef­fect won’t last, and my fore­cast for 2017 Brazil­ian econ­omy is zero per­cent growth.”

growth in agribusi­ness in the first quar­ter in Brazil

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