BRASILIA Brazil's economy is on track to pull out of its worst recession on record in the coming months despite a string of negative economic data this week, Finance Minister Henrique Meirelles told Reuters on Thursday.
In a telephone interview from the sidelines of the International Monetary Fund and World Bank fall meetings in Washington, Meirelles said he is sticking by his forecast for an economic rebound of 1.6 percent next year.
The minister added that Brazil's centre-right government would press ahead with reforms, presenting a proposal for an overhaul of the bloated welfare system to Congress this month. He also voiced confidence that a constitutional amendment to cap public spending would be approved this year.
"In a recovery, you usually have ups and downs, but the median is what matters," said Meirelles, adding that he expects Brazil's $2 trillion economy to return to growth in the last quarter of this year.
A sharp drop in industrial output in August and a surge in unemployment raised fears this week that the Brazilian economy could take longer to recover from its worst recession in a century.
The approval of fiscal austerity reforms in Congress would support the incipient recovery and shield the South American nation from global downturns, Meirelles said.
However, he dismissed a recommendation by the IMF to set a long-term budget surplus target, saying that a proposed ceiling on public spending is a more credible goal.
Meirelles said the approval of the spending cap proposal in a congressional committee on Thursday was a step in the right direction to rebalance the public accounts.
GLOBALIZATION TO PREVAIL
Meirelles, a former chief operating officer of BankBoston Corp, said he is confident a wave of protectionism in the United States and Europe will be short-lived.
"I believe this is cyclical and the trend of globalization will continue because it is inevitable," Meirelles said.
Meirelles is an adamant supporter of opening Brazil, which is considered the most closed major economy in the Americas.
He also warned that keeping U.S. interest rates low for too long could pose a threat to the global economy by creating market bubbles.
He said emerging nations should reform their economies to prepare for an imminent increase in rates in developed countries.
"It would be dangerous for Brazil and any other economy to remain dependent on high global liquidity to grow," Meirelles said.
(Reporting by Alonso Soto; Editing by Daniel Flynn and James Dalgleish)