Financial market forecasts 3.66% GDP shrinkage in 2016
The financial market's forecast for Brazil's economic decline this year has been revised for the tenth consecutive time, changing from 3.60% to 3.66%.
For 2017, the expected GDP growth went down from 0.44% to 0.35%, the second consecutive change.
These forecasts are part of the Focus Market Readout, a weekly report published by the Central Bank based on projections from financial institutions for the main economic indicators.
Financial analysts expect the annual inflation measured by the Broad National Consumer Price Index (IPCA) to close out this year at 7.31%—this has been the third consecutive revision for this projection. Last week, the forecast was 7.43%. The forecast for 2017 remains at 6%, an unchanged projection for seven consecutive weeks.
The inflation projections are above the target set by the government of 4.5%, within a ceiling of 6.5% this year and 6% in 2017.
Interest
In a scenario of economic downturn and high inflation, financial institutions do not expect the key interest rate (SELIC) to change this year. The interest rate is expected to close out 2016 at its current 14.25% per annum. The median of expectations (which excludes end values from the projected range) is 12.50% p.a. at the close of 2017.
The key interest rate is used for trading government securities under the Special System of Settlement and Custody (SELIC) and provides a benchmark for other interest rates in the market. Increases allow the Central Bank to contain inflationary pressures created by excess demand by making the cost of credit more expensive and encouraging a saving behavior. When it lowers the benchmark interest rate, the Monetary Policy Committee (COPOM) makes credit cheaper and encourages production and consumption, but loosens inflation control.
Dollar
The dollar exchange rate expected in the end of 2016 is R$4.15 (revised from R$4.20) and R$4.20 in the end of 2017 (down from a previous forecast of R$4.30).
Translated by Mayra Borges
Fonte: Financial market forecasts 3.66% GDP shrinkage in 2016
