By Lucy Jordan, Senior Contributing Reporter

BRASÍLIA, BRAZIL – Finance Minister Guido Mantega revised Brazil’s economic growth forecast for this year to two percent Thursday, from an earlier estimate of three percent. The downgrade comes as a response to Brazil’s continuing struggle with an economy that has stagnated over the past 18 months, growing just 2.7 percent in 2011, down from 7.5 percent in 2010, as it faces shockwaves from the global economic crisis and China’s economic slowdown.

Finance Minister Guido Mantega announced a revised estimate of GDP growth to two percent and extended payroll tax cuts Thursday, photo by Antonio Cruz/ABr.

Despite its reduction, the Ministry’s forecast remains above that of the market, which, according to a Central Bank survey of some 100 banks, financial institutions and consultants, is just 1.62 percent.

Mantega also announced to reporters in Brasília that tax-breaks to more than twenty industries would be extended, the latest in a slew of stimulus measures initiated this year. These have included billions in government purchases, reduced energy bills and a record-breaking reduction in the Selic, or basic interest rate, to 7.5 percent.

Analysts frequently cite bad infrastructure, suffocating bureaucracy and high taxes as the most serious challenges to Brazil’s economy.

The payroll tax breaks will take effect in January and benefit 25 sectors, including public transportation, producers of poultry, fish, bread and pasta, and the white goods industry, meaning that they will no longer pay twenty percent social security contribution on the payroll, Folha reported. These tax-breaks already apply to fifteen other sectors, bringing the total to forty.

Mantega announced the measures shortly after the U.S. Federal Reserve revealed its own stimulus measures, declaring it would buy mortgage bonds until the economy improved and unemployment declined.

Read more (in Portuguese).

* The Rio Times Daily Update is offered to help keep you up-to-date with important news as it happens.

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