Market sees higher inflation and lower GDP growth in Brazil in 2021 – Focus report

RIO DE JANEIRO, BRAZIL – The median forecast of economists in the market for the National Wide Consumer Price Index (IPCA) in 2021 rose for the 19th consecutive week, from 6.88% to 7.05% high, according to the Focus Report, the Central Bank (BC) released on Monday with estimates collected by the end of last week.

For 2022, the inflation forecast also increased for the fourth consecutive week, rising from 3.84% to 3.90% increase.

For the benchmark treasury rate (SELIC), the median of expectations rose from 7.25% to 7.50% at both the end of 2021 and 2022. The original inflation target by the Central Bank is 3.75% in 2021 and 3.50% in 2022, with a tolerance range of 1.5 percentage points plus or minus.

At its last meeting in early August, the Monetary Policy Committee (Copom) raised the SELIC rate from 4.25% to 5.25% per year, in line with market expectations.

Focus also reported that the median market forecast for Brazilian economic growth in 2021 fell last week, after accelerating for 15 consecutive weeks, from 5.30% to 5.28%.

For 2022, the median expectation for gross domestic product (GDP) growth fell for the second consecutive week, from 2.05% to 2.04%.

The Brazilian economy grew 1.2% in the first quarter of 2021, the Brazilian Institute of Geography and Statistics (IBGE) reported in early June.

The peak was above the median of Valor Data’s estimates of 0.7%, with a forecast interval that ranged from stability to expansion of 2.4% among the 55 consulting firms and financial institutions surveyed. The GDP result for the 2nd quarter will be announced on September 1.

In foreign exchange, the median estimate for the dollar was maintained at R$5.10 at the end of this year and R$5.20 next calendar year.

TOP FIVE ECONOMISTS

The median estimate for the consumer price index (IPCA) this year rose from 7.11% to 7.62% among the economists who most revise the forecasts produced by the Central Bank, the so-called top 5. For 2022, their median expectation for official Brazilian inflation also rose, from 3.95% to 4% between the last and the most recent survey.

The projection for SELIC increased from 7.25% to 7.50% at the end of 2021 and remained at 7.50% in 2022 within this select group.

For the dollar, they lowered their estimates from R$5.05 to R$5.00 at the end of this year and from R$5.25 to R$4.90 at the end of next year.