(Adds inflation forecasts, context on expected budget measures)
BRASILIA, March 22 Brazil's government lowered
its estimate for economic growth in 2017 but forecast a stronger
recovery next year, a revision likely to lead to budget freezes
and tax hikes as the country emerges from its worst recession on
The Finance Ministry lowered its growth estimate for 2017 to
0.5 percent from 1.0 percent and forecast an expansion of 2.5
percent in 2018, according to a statement. The estimates are in
line with the consensus view of about 100 economists who the
central bank polls weekly.
The government also lowered its 2017 inflation forecast to
4.3 percent from 4.7 percent, below its 4.5 percent target. It
said it expected inflation to end 2018 at 4.5 percent.
The ministry is expected to announce spending freezes of 30
billion reais to 35 billion reais ($9.7 billion to $11.31
billion) and tax increases later on Wednesday as it tries to
meet its 2017 budget deficit target.
Brazil's primary budget deficit target for this year is 139
billion reais, but the country's two-year recession has shrunk
revenue. Finance Minister Henrique Meirelles has reiterated in
recent days that the government was unwilling to raise taxes but
would do so if necessary.
The tax increases under consideration include one on
gasoline and another on financial operations called IOF, both of
which would not require legislation, Senate leader Romero Jucá
told Reuters on Tuesday.
The recession sent unemployment to a record high and cost
Brazil its investment-grade debt rating.
The central bank has slashed interest rates from a decade
high to try to boost growth, while President Michel Temer pushes
through an agenda of austerity measures to attract foreign
(Reporting by Marcela Ayres; Writing by Silvio Cascione;
Editing by Lisa Von Ahn)