UBS slashes Brazil 2014 growth forecast

UBS cut its 2014 growth forecast for the Brazilian economy by half.

The Swiss firm reduced this year's forecast to 0.6% from 1.2% and it also cut its 2015 forecast to 1.5% from 1.8%.

A combination of economic policy uncertainty and political noise significantly hurt confidence and private sector activity in the first half, the financial services giant said in a report.

Given increased political uncertainty following the recent and tragic death of presidential candidate Eduardo Campos and more doubts over how Brazil's economic policy will be shaped in the coming years, UBS said that it does not expect any investment recovery anytime soon.

In June, the country's GDP shrank a seasonally adjusted 1.48% month-on-month and 2.15% year-on-year in what turned out to be yet another disappointing month for Latin America's largest economy.

Several forecasters, including Barclays Capital and Capital Economics, expect second quarter figures to be released on August 29 to show that the sluggish economy contracted quarter-on-quarter in 2Q14.

The economy expanded 2.5% in 2013 and is expected by an increasing number of forecasters to grow less than 1% this year as the widespread lack of business and consumer confidence is not likely to return in force any time soon.

The latest installment of a weekly survey from the country's central bank shows that the median forecast from local analysts and economists is for GDP to expand 0.79% this year.