BRASILIA, Aug 25 (Reuters) - Fears of a sharper slowdown in China that sparked a rout in world markets could delay a Brazilian economic recovery which had been expected later this year, a senior Brazilian official said on Tuesday.
At an international trade event, Deputy Planning Minister Dyogo Oliveira said a slowing Chinese economy could lead to “a big change in the outlook of the global economy.”
Oliveira said the government expects the Brazilian economy to start a moderate recovery in late 2015 or early 2016 due to a jump in exports and improvement in credit markets, but that China was a major caveat.
“Everything I have said could change completely depending on how the facts (in China) develop,” Oliveira said.
China on Tuesday cut interest rates and lowered the amount of reserves banks need to hold in order to support its stuttering economy and a plunging stock market that has sent shockwaves around the globe.
A deepening downturn in China has dragged down the prices of global commodities such as iron ore and soy, which are key exports for Brazil. China is by far Brazil’s main trade partner.
A jump in exports due to a weaker local currency has been the only bright stop of the Brazilian economy that is expected to suffer its worst recession in 25 years. Market economists expect the first back-to-back annual contractions this year and next, since the aftermath of the Great Depression in the 1930s.
President Dilma Rousseff is betting the improvement in exports could ease the pain of the recession that has pushed unemployment to its highest level in five years.
Her administration is scrambling to plug a widening budget gap to regain the confidence of investors wary after years of interventionist policies and heavy public spending. (Reporting by Alonso Soto; Editing by Richard Chang)