BRASILIA (Reuters) - The outlook for Brazil’s economy deteriorated for a 12th week in a row, a central bank survey showed on Monday, and forecasts for public finances, inflation, interest rates and exchange rate were also lowered again as the COVID-19 crisis intensified.
Latin America’s largest economy is now expected to shrink by 3.8% this year, according to the average forecast of over 100 financial institutions in the bank’s ‘FOCUS’ survey, compared with last week’s forecast of a 3.3% contraction.
According to The World Bank, the biggest annual decline in gross domestic product in the last half century was the 4.4% contraction registered in 1981.
The FOCUS survey also showed the government is expected to post a primary budget deficit this year of 7.2% of GDP, compared with 6.2% the week before, closer to the 8% suggested by Treasury and Economy Ministry officials recently.
Inflation this year is expected to come in at 2%, a full two percentage points below the central bank’s official target. This will allow the central bank to cut its benchmark Selic rate to a new low of 2.75% by the end of the year, the survey showed.
The central bank is expected to lower the Selic by 50 basis points this week to 3.25%, according to a Reuters survey of economists.
Reporting by Jamie McGeever; Editing by Chizu Nomiyama