Brazil economy to strengthen in 2012 -President

Mon Feb 21, 2011 3:56pm EST

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* Brazil economy to strengthen in 2012-president

* Government to keep a lid on inflation-Rousseff

BRASILIA Feb 21 (Reuters) - Brazil's economy will pick up speed in 2012, the country's president said on Monday, in a tacit acknowledgment that growth this year could hit speed bumps after a strong performance last year.

"We know that the year of 2012 will be a year of a stronger economic recovery," President Dilma Rousseff told governors in the country's impoverished northeast.

A strong projected increase in the minimum monthly wage next year would help boost consumer demand, Rousseff said.

"There will be a significant adjustment to consumer purchasing power."

The lower house of Congress last week approved only a modest increase in the minimum wage [ID:nN16234548] for this year. But based on a formula that considers economic growth of previous years as well as inflation, the national minimum wage next year is likely to rise significantly.

Latin America's largest economy expanded by an estimated 7.6 percent in 2010, putting it among the ranks of fast-growing emerging market powerhouses that left behind still struggling developed economies.

Those gains largely came on the back of Brazilian consumers, who took advantage of relatively cheap credit, tax breaks and a strong currency to pack shopping malls.

But economists in the most recent weekly central bank survey saw the economy growing about 4.5 percent this year, with inflation at 5.79 percent for the year.

Rousseff said the government would remain tough on rising consumer prices.

"We're perfectly aware of how to avoid inflationary pressures in Brazil, and we won't let that happen," Rousseff said.

The central bank raised its benchmark interest rate to 11.25 percent in January from 10.75 percent in a bid to contain price pressures. The clampdown on credit is expected to help keep growth at around 4.5 percent next year, according to a central bank survey of leading banks published on Monday. (Reporting by Leonardo Goy; Writing by Luciana Lopez; Editing by Jan Paschal)

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