RIO DE JANEIRO, BRAZIL – The forecast of financial institutions for economic growth this year has increased slightly. The estimated growth in Gross Domestic Product (GDP), the sum of all goods and services produced in the country, rose from 0.91 to 0.92 percent.
The projections for the following years remained unchanged: 2.0 percent in 2020; and 2.50 percent in 2021 and 2022. These estimates are based on a weekly survey of financial institutions prepared by the Central Bank (BC).
According to the Focus bulletin, financial institutions maintained the forecast for inflation, computed by the Broad National Consumer Price Index (IPCA) at 3.29 percent in 2019, 3.60 percent in 2020, 3.75 percent in 2021, and 3.50 percent in 2022.
The projections for 2019 and 2020 are below the center of the inflation target to be pursued by the Central Bank. The inflation target, defined by the National Monetary Council, is 4.25 percent in 2019, 4.0 percent in 2020, 3.75 percent in 2021 and 3.50 percent in 2022, with a tolerance interval of 1.5 percentage points plus or minus.
SELIC Rate
The main tool used by the Central Bank to control inflation is the basic interest rate, the SELIC. When the Central Bank’s Monetary Policy Committee (COPOM) reduces the SELIC rate, the trend is for credit to become cheaper, encouraging production and consumption, reducing inflation control and boosting economic activity.
When the COPOM increases the SELIC, the goal is to contain the heated demand and this is reflected in prices because higher interest rates increase the price of credit and stimulate savings. According to the financial market, the SELIC should end 2019 and 2020 at 4.50 percent per year.
It is expected that the SELIC will end the period at 6.0 percent per year by 2021. By the end of 2022, the forecast is for 6.50 percent per year.
Dollar
The forecast for the dollar rate remains at R$4.00 for the end of both 2019 and 2020.
Source: Agência Brasil