Forecasts for Inflation in Brazil Continue to Rise, GDP Fall

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Estimates by financial analysts regarding annual inflation in Brazil for 2015 have once again increased, from 7.77 percent to 7.93 percent this week, according to the latest Focus Survey, released by the Central Bank. According to the survey analysts also see deterioration in the country’s GDP and industrial production, a devaluation of the country’s currency and a decrease in foreign investments this year.

According to the Focus Survey, the country’s GDP (Gross Domestic Product) will register a negative balance of -0.78 percent in 2015. Last week the forecast had stood at -0.66 percent. Industrial production is also expected to decline by 2.19 percent by the end of the year, a significant deterioration from last week’s forecast of a diminution of 1.38 percent.

Despite the surge of the US dollar in relation to the Brazilian real, the foreign exchange rate at the end of 2015 should be at R$3.06/US$, according to analysts.

At the beginning of last week, analysts had predicted the foreign exchange rate at the end of the year at R$2.95/US$, while the rate on Friday, March 13th, in the market had been at R$3.24/US$, the highest rate since 2003. Forecasts of foreign investments this year in Brazil also decreased from last week’s US$60 billion to US$57.5 billion.

Although inflation expectations increased and GDP and industrial production end-of-year numbers continue to retract, analysts have maintained their benchmark interest rate (Selic) forecast for the year at thirteen percent. The net debt of the public sector was also not changed, remaining at 38 percent of the GDP.