UPDATE 1-Economists slash Brazil economic growth forecasts

Mon Dec 10, 2012 6:10am EST

Related Topics

* Brazil seen growing just 1 pct this year
    * Interest rates to remain at 7.25 pct through 2013
    * 2012 inflation view revised up to 5.58 pct


    By Silvio Cascione
    SAO PAULO, Dec 10 (Reuters) - Economists slashed forecasts
for Brazil's economic expansion for this and next year for the
fourth straight week, a central bank survey showed on Monday.
    The world's sixth-largest economy, one of the fastest
growing emerging countries only two years ago, is now expected
to expand just 1.03 percent this year, less than the
International Monetary Fund forecasts for Japan and the United
States and about the same as Germany. 
    The central bank survey of about 100 financial institutions
also showed a downward revision in the median of their 2013
growth forecasts to 3.50 percent, from 3.70 percent previously.
    Brazil nearly fell into recession one year ago as local
manufacturers struggled with an overvalued currency, high labor
costs and a weak global economy. Chronically low investment
levels have also reduced Brazil's potential growth.
    The economy is slowly recovering, though at a slower pace
than previously expected, after President Dilma Rousseff's
government offered several tax reductions for targeted
industries. The central bank also cut interest rates 10 straight
times to a record low of 7.25 percent.
    Many banks such as Barclays, Itau BBA and Banco Santander
Brasil last week slashed their forecasts for interest rates in
2013, expecting another round of government stimulus to prop up
the economy. The median market forecast for the benchmark Selic
rate, however, stood at 7.25 percent at end-2013.
    The median forecast for inflation in 2012 was revised up
after a surprise jump in November reported last week. Consumer
prices should rise 5.58 percent in 2012, up from a forecast of
5.43 percent in the prior week, according to the survey.
    The government targets inflation at 4.5 percent, with a
tolerance margin of 2 percentage points in each direction.
Inflation accelerated more than expected in November after
transportation and electricity prices spiked.2012                 2013
 (pct)                previous   new       previous  new
                      forecast   forecast  forecast  forecast
 Consumer inflation   5.43       5.58      5.40      5.40
 Exchange rate        2.07       2.08      2.06      2.08

 Interest rate        7.25       7.25      7.25      7.25

 GDP growth           1.27       1.03      3.70      3.50
 Industrial output    -2.38      -2.27     3.82      3.75
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