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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Central Bank of Brazil increased its inflation forecast for this year, but was slightly more optimistic about the country’s growth, reducing the negative growth forecast for the GDP this year. According to the Quarterly Inflation Report released on Tuesday, June 28th, inflation should rise to 6.9 percent this year in Brazil.

Brazil,The reduction in the production of corn is expected to affect the agribusiness sector GDP this year
The reduction in the production of corn is expected to affect the agribusiness sector GDP this year, photo by Jonas Oliveira/AEPR

This represents an increase from the 6.6 percent forecast in March, while the GDP should register a lower contraction, of 3.3 percent instead of the 3.5 percent previously forecast.

The inflation forecast continues to be above the target ceiling of 6.5 percent, and well above the 4.5 percent target center established by the country’s Central Bank. For 2017 inflation should register a retraction, decreasing to 4.7 percent. In March next year’s inflation had been forecast at 4.9 percent.

In the GDP forecast, the agribusiness sector was the biggest surprise, now with a forecast of a retraction of 1.1 percent, while in March officials had forecast a growth of 0.2 percent. According to officials the retraction in the sector is due to forecasts of a reduction in the volume of soybean, sugarcane and corn produced this year.

Industry is expected to decrease by 4.6 percent while services’ forecast remained the same, decrease of 2.4 percent. In the March quarterly report industry’s contraction was forecast at a much higher rate, of 5.8 percent. As expected the report shows a growth of exports and a decrease in imports. Export growth was forecast at 7.5 percent, while the decline in imports of goods and services is expected to reach fourteen percent.

“The evolution forecast for exports, due to the moderate recovery of global economic activity, reflects the positive performance of commodities which have been influenced by the competitiveness gains resulting from the depreciation of the (Brazilian) real,” says the Central Bank in its quarterly report.

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