Market worsens outlook for GDP fall in 2020 to almost -6%

The market's expectation for the contraction of the Brazilian economy approached 6% in the Focus survey released by the Central Bank on Monday, although the view on the recovery in 2021 improved. According to the weekly survey, gross domestic product is expected to contract by 5.89% in 2020, from a previously expected drop of 5.12%. For 2021, the growth estimate improved by 0.3 percentage points to 3.50%. The Ministry of Economy forecasts gdp contraction in 2020 of 4.7%, against a 0.02% increase seen in March. This would be the worst result of the historical series that began in 1900. The scenario for monetary policy this year remained the same, with the experts consulted keeping the basic interest rate forecast at 2.25%. But for 2021 the bill fell to 3.29% in the median projections, from 3.50% in the previous week. The Top-5, the group that best matches forecasts, also sees Selic at 2.25% this year, but has reduced the outlook next year to 2.88%, from 3.50% earlier. The survey of a hundred economists also pointed out that the expectation for inflation increased to 1.57% in 2020 and 3.14% in 2021, from 1.59% and 3.20% respectively in the previous survey. The center of the official 2020 target is 4% and, for 2021, 3.75%, both with a tolerance margin of 1.5 percentage points more or less. The scenario for the dollar also changed, with the U.S. currency estimated at 5.40 reais this year compared to 5.28 reais before, and falling to 5.03 reais at the end of 2021, from 5 reais previously.