UPDATE 1-Real cuts to Brazil budget smaller than thought

* Brazil govt raises growth forecast in 2010 budget

* Govt now sees 5.5 pct inflation versus 5 pct previously
(Recasts with revision to planned budget cut)

BRASILIA, May 20 (BestGrowthStock) – A $5.4 billion cut in Brazil’s
2010 budget, announced last week and intended to cool its
booming economy, is partly the result of some cost estimates
which have been revised down, rather than outright cuts,
figures from the Planning Ministry showed on Thursday.

A breakdown of the revision to the budget shows that the 10
billion reais reduction is made up of cuts totaling 7.6 billion
reais. The remaining 2.4 billion was merely savings from cost
estimates that were revised down and would have reduced
spending budget anyway.

Brazil has been seeking to tame its economy which has made
a strong rebound after a short-lived recession during the
global economic crisis, and raised its interest rate by 75
basis points in April to 9.5 percent to curb inflationary
pressures.

The planning ministry also raised its forecast on Thursday,
for growth this year in the 2010 budget to 5.5 percent from 5.2
percent previously.

It also revised higher its estimate for inflation,
expecting the IPCA Consumer Price Index to end the year at 5.5
percent, instead of a previously projected 5.0 percent.

That is still modest by market expectations, with analysts
forecasting more than 6 percent growth in 2010 in the latest
central bank survey and the more optimistic banks expecting
economic expansion of as much as 7.5 percent.

The revision comes only one day after the central bank
said its new Brazilian Economic Activity Index pointed to an
expansion in economic activity of nearly 10 percent in the
first quarter of this year compared with the same time in 2009.
[ID:nN19233560].

The budget also foresees an average real rate against the
U.S. dollar of 1.79 compared to 1.82 previously.

Brazil’s real (BRBY: ) slumped almost 3 percent on Thursday
to trade at 1.892 per dollar.

The average rate for the Selic, the benchmark interest
rate, is seen at 9.19 percent, compared with a previous
forecast of 8.7 percent.

Investing Basics

(Reporting by Isabel Versiani; Writing by Ana Nicolaci da
Costa and Peter Murphy; Editing by Jan Paschal and Richard
Chang)

UPDATE 1-Real cuts to Brazil budget smaller than thought