Inflation Rate and Economic Stability of Brazil

Inflation Rate and Economic Stability of Brazil Introduction This paper is concerned with the economic consideration of one of the South American countries and analyzes the impact of an economic concern on that particular South American country that has been chosen and identifies the trend of the economic concern with in specified region on the basis of data sets accumulate from the source. The south American countries has major impact on American economy and the economic concern of one of an important country raise our body of knowledge regarding the economic trend in that particular country and its impact on overall economy as well. South American Country The economy of South America consists of twelve nations with three territories and comprise of 6% of population in the world. I have choose Brazil among other South American countries as Brazil is the largest South American country and Brazil is one of the fastest growing economies of the world. It is ranked at fifth spot in the world regarding population and geographical region and fifth largest economy regarding GDP in the world. The economic concern of Brazil is effectively contributes to world economy and interesting trend of economy can be seen. (Abreu, 2005). Economic Concern Among four economic concern including GDP, quantities of specific Goods and services gross Domestic Product (GDP), and unemployment inflation I have selected inflation. Inflation is an important economic concern that will effect the economy in great extend and inflation rate of a country economy is an important indicator for a country growth prospective. Inflation means rise in the general price level of the country and loss the real value of money as fewer commodities will bought with each additional unit of currency. Inflation directly relate to the economic productivity and has positive and negative both effect on economy as it create economic uncertainty which may discourage saving and investment. High prices of general commodities and hoarding will be its largest disadvantage. In positive sense it may encourage non monetary investment. But the inflation rate needs to be control in order to sustain country economy. Inflation trend in Brazil The inflation rate in Brazil is fluctuating over the years. No consistent trend can be seen in the inflation rate ac past year data support this assumption. According to the data displayed by ( IPCA) in 2002 the inflation rate was 12.53% that is quite high rate. Then the decreasing trend of inflation rate can be seen in Brazil economy as 9.3% in 2003, 7.6% in 2004, 5.69% in 2005, and 3.14% in 2006 that is least in this decade. Then the slight increasing trend can be seen in rate of inflation. 4.46% can be seen in 2007 and 5.91 in 2008. The fluctuating trend can be seen in this range in coming years as well. (Inflation Statistical table) Statistical Table Inflation (IPCA) 2002 12.53% 2003 9.30% 2004 7.60% 2005 5.69% 2006 3.14% 2007 4.46% 2008 5.91% Past two years Inflation Trend Past two years monthly inflation rate trend can be seen from this graph that shows the monthly frequency of the inflation rate. The graph bars shows the trend of inflation from year 2011 that is 6.01%. The increasing slope can be seen from March, 2011 up to October, 2011. Inflation rate at the month of October is the highest that is 7.31%. Then the control implementation on inflation increasing trend can be seen from 7.31% to the deep low rate at 4.92% in July, 2012 that is complemented to Brazil economy. The upward Trent at semi annual bases can be seen in Brazil economy. The last recorded inflation rate of 6.15% that is quite high. Brazil government target inflation rate is 4.5% with the plus and minus tolerance margin of 2% in it. The high inflation trend is important consideration for the government as increasing inflation rate affect the economy in deep roots and make the investment and saving difficult. People purchasing power will be effected that will effect their standard of living and indulge the poverty level in the country as commodities will be difficult to purchase with even more money in hand because due to inflation country will lose its real money value. (De Paiva Abreu, 2005). According to IBGE report it is recorded from 1980 the Brazil inflation trend has gone through various fluctuations. Historical data shows average of 411.8 % Brazil inflation rate that reached at highest rate of inflation of 6821.3 % in April 1990 that was the highest rate for all time. The low inflation rate of 1.7 percent was found in December 1998. The measure used to calculate inflation is consumer price index. Brazil important contribution in consumer price index are tobacco, food and alcohol that covers 31% of total, 15 percent by transport sector and communication carries 5 %. . (Brazil Inflation Rate) Statistical Evidence comparing various countries inflation rate Inflation Rate of various countries is showing the Brazil high rate of inflation as compare to other countries except India that has the inflation Rate o f 6.62. An increasing trend is quite threatening for Brazilian government for economic growth and required close consideration to control the rate in future in order to stabilize the economy. Conclusion The Inflation rate and economic stability are closely related to one another and required close concern in order to stabilize the economy. Brazil increasing trend provide the threatening for its future concerns and shows that the government need to closely consider this regime in order to stabilize the economy and to achieve the economical growth in the world.