Focus Report Brazil: Market projects lower economic growth and higher inflation in 2021

RIO DE JANEIRO, BRAZIL – According to the Focus Report, median projections for Brazil’s GDP dropped again, while the average point for the National Wide Consumer Price Index (IPCA) indicates a high of 4.60% at the end of this year.

The median of the market’s projections for the Brazilian economy dropped again in the Central Bank’s (BC) Focus Report, released this Monday, March 15th,  with estimates compiled up to the end of last week.

For 2021, the median point of expectations for Gross Domestic Product (GDP) variation was reduced from 3.26% to 3.23%, and for 2022, from 2.48% to 2.39%.

The Brazilian economy shrank 4.1% in 2020, reported the Brazilian Institute of Geography and Statistics (IBGE) earlier this month. It was the worst GDP result in a full year since official IBGE records, began in 1996. The largest recorded drop had occurred in 2015 (-3.5%).

GDP grew 3.2% in the fourth quarter of 2020 compared to the third, seasonally adjusted.

Inflation

The median of market economists’ projections for the IPCA in 2021 rose from 3.98% to 4.60%. For 2022, it remained at 3.50%.

Among economists with the most accurate projections, the so-called Top 5, the median for inflation this year rose again, now from 4.04% to 4.96%. For 2022, the midpoint of expectations for Brazilian official inflation also rose, but from 3.50% to 3.56%.

The Central Bank’s inflation target is 3.75% in 2021 and 3.50% in 2022, with a tolerance interval of 1.5 percentage points up or down.

Interest

As for the basic interest rate (SELIC), the median point of expectations rose from 4.00% per annum to 4.50% by the end of 2021 and remained at 5.50% per annum by the end of 2022.

For the Top 5, basic interest rate expectations were also adjusted upward, from 4.13% per annum to 4.75% by the end of 2021, and from 5.50% to 6.00% per annum by the end of 2022.

Dollar

The median of estimates for the dollar at the end of this year was raised from R$5.15 to R$5.30. For 2022, the median of projections was also raised, from R$5.13 to R$5.20 from one week to the next.

The top 5 also raised their estimates for the dollar at the end of this year, from R$5.00 to R$5.40, but reduced them from R$5.25 to R$5.18 for 2022.

Since the penultimate week in January, the Top 5’s estimates started to be published only through the Central Bank’s Market Expectations System – which is updated at 9 AM on Mondays with estimates compiled up to the end of the preceding week – and no longer through the Focus Report, which is published at 8:25 AM. The Central Bank’s weekly report continues to be published with the same regularity, but only with the results of projections from all economists taking part in the survey.