UPDATE 2-Brazil 2011 budget foresees 5.5 pct economic growth

* 2011 budget growth forecast more optimistic than markets

* New primary budget target is nominal

* Sees Selic rate at 10.75 pct at the end of 2011

* Sees investments of 52 billion reais in 2011
(Adds primary budget surplus target and byline)

By Isabel Versiani

BRASILIA, Aug 31 (BestGrowthStock) – Brazil’s economic growth will
probably slow by a full percentage point next year, according
to government budget estimates for 2011, reflecting the impact
of higher borrowing costs and a global slowdown.

Latin America’s largest economy will probably expand 5.5
percent in 2010, less than the 6.5 percent growth the
government estimates, the Planning Ministry said on Tuesday in
its 2011 budget proposal.

Investors and analysts are expecting growth to top 7
percent this year, the fastest annual expansion in more than a

Yet the projection in the budget estimates for 2011 is more
optimistic than those of market analysts in a weekly central
bank survey, who see Brazil’s economy growing 4.5 percent in
the coming year.

The government also expects to spend 52 billion reais in
investments ($29.6 billion) next year, according to the budget.
Last year, the 2010 budget was reported as earmarking 46
billion reais for investment spending, excluding that for
state-run companies.

The budget predicts the Selic, or the central bank
overnight lending rate, will end 2011 unchanged from its
current 10.75 percent, the ministry said.

The central bank announces its interest rate decision on
Wednesday but is seen keeping borrowing costs on hold, ending a
200-basis point tightening cycle that began in April.

Gross domestic product data for the second quarter on
Friday will give a glimpse on the extent the economy slowed in
the second quarter, following extraordinary growth in the first
three months of the year.

Next year’s targeted primary budget surplus, a key measure
of the government’s ability to service its debt, is to reach
125.5 billion reais ($71.56 bln).

Unlike previous years, the government announced a target in
nominal terms and not as a percentage of gross domestic

If the economy grows faster than 5.5 percent, the target
would fall below its equivalent of 3.2 percent of GDP, the
Planning Ministry said.

But the move was no indication of easing budget discipline,
he added.

“If GDP grows more, the target will be smaller. But if it
grows less, it’ll be bigger,” he said.

Brazil’s government is targeting a primary surplus of 3.3
percent of GDP this year, more than a full percentage point
above the 2.03 percent for the surplus in the 12 months through
July. See [ID:nN26189174] for story.

($1=1.754 reais)
(Writing by Ana Nicolaci da Costa; Editing by Padraic Cassidy
and Leslie Adler)

UPDATE 2-Brazil 2011 budget foresees 5.5 pct economic growth