New Report Forecasts Over Three Percent Drop in GDP for Brazil

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The weekly survey, Focus Report, conducted by Brazil’s Central Bank with one hundred financial institutions, shows that economists are not very optimistic with Brazilian economic indicators. According to these institutions, Brazil’s GDP for 2016 should register a retraction of over three percent and 2017 GDP growth should increase less than one percent.

The Focus Report forecast calls for a retraction of the GDP growth this year by 3.43 percent. The previous week the retraction was a little larger, at 3.49 percent.

This is the first time that the country will register two consecutive years of contractions since the Brazilian Statistics Bureau (IBGE) started its compilation, in 1948. Last year, the GDP growth registered a retraction of 3.8 percent, the highest in 25 years.

For 2017, the expectation of GDP growth was revised from a positive 0.98 percent to 0.80 percent. This is the seventh consecutive reduction economists have made on the GDP forecast for next year.

On the other hand, the Focus Report reduced inflation (IPCA) forecasts for this year for the fourth consecutive time, this time from the previous week’s 6.72 percent to 6.69 percent. For 2017, the forecast remains at 4.9 percent for the past three weeks.

In both cases, however, the forecasts surpass the center of the target, which is of 4.5 percent. The target ceiling for this year is 6.5 percent this year, and 6 percent in 2017.

The forecast for the SELIC (benchmark interest rate) for the end of 2017 fell from 10.75 percent to 10.50 percent per year. Last week the Selic was reduced by In the 0.25 percentage points to 13.75 percent a year in the last Monetary Policy Committee (COPOM) meeting of 2016.