Brazil’s GDP Growth Rate May Contract by 2.44 Percent in 2015

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Estimates by financial analysts for Brazil’s Gross Domestic Product (GDP) growth rate in 2015 have deteriorated further, from a contraction of 2.01 percent at the beginning of August to 2.44 percent last week, according to the latest Focus Survey, released by the Central Bank. This is the eight consecutive time the GDP growth rate has declined. For 2016 the growth rate forecast went from a contraction of 0.4 percent to a contraction of 0.5 percent.

The weekly survey conducted with a hundred bank analysts also shows that the country’s industrial production is also expected to decline more than in the previous forecasts, by six percent by the end of the year, from last week’s forecast of a reduction by 5.57 percent. In 2016 the survey calls for a recovery in industrial production with a growth rate of 0.72 percent.

According to the latest Focus Survey Brazil’s annual inflation rate (IPCA) will surpass the government’s target (4.5 percent), registering a 9.29 percent inflation growth for the year. For 2016, however analysts forecast a much lower annual inflation, of 5.58 percent. With last week’s appreciation surge of the U.S. dollar in relation to the Brazilian real, analysts are now forecasting a foreign exchange rate of R$ 3.60/US$ for the end of 2015 and increased the foreign exchange rate at the end of 2016 from R$ 3.60/US$ to R$ 3.70/US$.

Despite the recent deterioration of some economic indicators, analysts have maintained their benchmark interest rate (Selic) forecast for this year at 14.25 percent. For 2016 the estimate is that the Selic will be reduced to twelve percent per year.