Brazil’s Economy Continues to Weaken, Says Central Bank

By Newsfeed/Bloomberg

RIO DE JANEIRO, BRAZIL – Latin America’s largest economy will expand 1.24 percent this year, according to the median forecast from economists surveyed by the Central Bank, down from their 1.45 percent call last week and half of what they expected three months ago.

It is the twelfth straight week in which they reduced their estimates. Brazil grew at 1.1 percent in both 2017 and 2018.

Analysts brimmed with optimism after Jair Bolsonaro’s election last year, expecting measures to liberalize the economy and a surge in investment that would boost growth.

Instead, there has been slow progress winning over lawmakers to secure passage of a key pension reform, which has kept investors in wait-and-see mode. Unemployment is stubbornly in double digits, crimping consumption despite record-low interest rates.

The latest cut in Brazil’s growth forecast came after a key indicator of economic activity shrank 0.68 percent in the first quarter and the Central Bank also warned that the economy was likely to contract in the period.

Weak economic activity has been accompanied by subdued inflation, which is seen ending 2019 at 4.07 percent.

According to data the Getulio Vargas Foundation released on Monday, the second preview of Brazil’s broadest inflation measure for May slowed more than economists had forecast.

Economists also pared their forecast for the benchmark Selic rate, which they had expected to remain at an all-time low of 6.5 percent this year. They now see it rising to 7.25 percent by end-2020, from 7.5 percent previously.

(Source: Bloomberg)