Brazil's GDP gets another analyst downgrade

Monday, November 28, 2016

Analysts consulted by the Brazilian central bank continue to cut their forecasts for the country's GDP this year and the next.

The economy is now seen contracting 3.49% in 2016. Last week, the forecast was for a 3.40% contraction, while last month's projection was -3.30%. For 2017, growth of 0.98% is expected, down from 1.00% a week ago and 1.21% a month ago.

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The expectation for Brazil's 2016 benchmark interest rate, known as the Selic, is unchanged at 13.75%, while end-2017 is still expected to see a rate of 10.75%.

The Selic currently stands at 14.0% after the rate was cut in the last monetary policy committee meeting in October, following nine consecutive meetings in which it was kept at 14.25%.

Before Donald Trump's election as US president, the rate was expected to continue to see gradual cuts this year; but there is now uncertainty about what will happen at the next Copom meeting, scheduled to take place at the end of November.

Analysts' forecasts for the local currency are up in 2016, reaching 3.35 reais per US dollar compared to 3.30 reais a week ago and 3.20 reais a month ago. For 2017, projections are steady at 3.40 reais per US dollar.

Inflation expectations for this year dropped again this week, this time to 6.72%, compared to 6.80% last week and 6.88% last month. The forecast for 2017 is unchanged at 4.93%.