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Analysts at financial institutions have again lowered the forecast for Gross Domestic Product (GDP) this year and also the estimate for inflation.
The projections are part of the market bulletin, known as the “Focus” report, published on Monday (11) by the Central Bank (BC). The data was collected last week in a survey of more than 100 financial institutions.
For 2020 GDP, the the expectation of reduction went from 3.76% to 4.11%. This was week 13 followed by a downward revision of the indicator.
MARKET FORECASTS FOR 2020 GDP
(IN%)
Source: CENTRAL BANK
Despite the new drop, the market forecast for the contraction of Brazilian GDP in 2020 is still below that published by the World Bank, which estimates a 5% drop, and by the International Monetary Fund (IMF), which forecasts a 5.3% drop
GDP is the sum of all the goods and services produced in the country and is used to measure the evolution of the economy.
The greatest reduction in expectations for the level of activity was in the midst of the pandemic of the new coronavirus, which has brought down the world economy and put the world on the road to recession.
In 2019, according to data from the Brazilian Institute of Geography and Statistics (IBGE), GDP grew 1.1%. It was the weakest performance in three years.
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For next year, the financial market forecast for the growth of the Gross Domestic Product (GDP) continued at 3.20%.
The IMF predicts a 5.3% drop in Brazilian GDP in 2020
According to the report published by the Central Bank, financial market analysts reduced, from 1.97% to 1.76%, the inflation estimate for 2020. It was the ninth reduction followed by the indicator.
The market inflation expectation for this year remains below the central target of 4%, and also below the target system floor, which is 2.5% this year.
Under the current rule, the HICP can vary from 2.5% to 5.5% without the target being formally violated. When the objective is not met, the BC has to write a public letter explaining the reasons.
The inflation target is established by the National Monetary Council (CMN). To achieve this, the Central Bank increases or reduces the basic interest rate of the economy (Selic).
By 2021, the financial market lowered its inflation forecast from 3.30% to 3.25%. Next year, the core inflation target is 3.75% and it will be officially met if the index fluctuates from 2.25% to 5.25%.
The market began to forecast a further cut in the basic interest rate of the Brazilian economy this year. Currently the The Selic rate is 3% per year.
A Analysts’ forecast for the Selic rate in late 2020 went from 2.75% to 2.50% per year.
At the end of 2021, market expectations fell from 3.75% to 3.50% per year. This means that analysts continue to estimate high interest rates next year, albeit to a lesser extent.
- Dollar: the projection for the exchange rate at the end of 2020 remained stable at R $ 5. For the end of 2021, it increased from R $ 4.75 per dollar to R $ 4.83 per dollar.
- Balance of trade: For the trade balance (result of total exports minus imports), the projection in 2020 increased from US $ 42 billion to US $ 42.50 billion with positive results. For the coming year, the market experts estimate continued at $ 42 billion.
- Foreign investment: The forecast of the report for the entry of foreign direct investment in Brazil in 2020 increased from US $ 70 billion to US $ 70.75 billion. By 2021, analyst estimates fell from $ 80 billion to $ 79 billion.
