Monday, June 08, 2020

Market analysts see 6.48% drop in GDP in 2020

Financial market analysts have cut their forecast for Gross Domestic Product (GDP) for the 17th time this year and have also lowered inflation expectations in 2020.
For 2020 GDP, the projection went from 6.25% to 6.48%. GDP is the sum of all goods and services produced in the country and serves to measure the evolution of the economy.
The projections are part of the market bulletin, known as "Focus" report, released on Monday (8) by the Central Bank (BC). The data were collected last week in a survey of more than 100 financial institutions.
The further reduction in expectations for the level of activity was made amid the pandemic of the new coronavirus, which has brought down the world economy and put the world on the path to recession.
On May 13, the Brazilian government estimated a 4.7% drop to 2020 GDP, based on the prospect that social distancing measures will end at the end of May.
The World Bank forecasts a 5% drop in Brazilian GDP and the International Monetary Fund (IMF) estimates a 5.3% drop in 2020.
In 2019, according to data from the Brazilian Institute of Geography and Statistics (IBGE), GDP grew by 1.1%. It was the weakest performance in three years. In the first three months of 2020, a 1.5% decrease in the Brazilian economy was recorded.
For next year, the financial market forecast for gross domestic product (GDP) growth remained stable at 3.50%.
According to the report released by bc, financial market analysts reduced the inflation estimate for 2020 from 1.55% to 1.53%. It was the 13th reduction followed by the indicator.
If confirmed this will be the lowest level since the beginning of the historical series of the Brazilian Institute of Geography and Statistics (BGE) in 1995. The lowest inflation recorded since then was in 1998 (1.65%).
The market inflation expectation for this year remains below the central target of 4%, and also the floor of the target system, which is 2.5% this year.
Under the current rule, the IPCA can range from 2.5% to 5.5% without the target being formally missed. When the goal is not met, the BC has to write a public letter explaining the reasons.
The inflation target is set by the National Monetary Council (CMN). To achieve this, the Central Bank raises or reduces the basic interest rate of the economy (Selic).
For 2021, the financial market maintained its inflation forecast at 3.10%. Next year, the central inflation target is 3.75% and will be officially met if the rate fluctuates from 2.25% to 5.25%.
The market continues to predict a cut in the basic interest rate of the Brazilian economy this year. Currently, the Selic rate is at 3% per year. Analysts' forecast for the Selic rate at the end of 2020 was stable at 2.25% per year.
By the end of 2021, market expectations rose from 3.38% to 3.50% per year. That means analysts are still estimating interest rates going up next year.
-Dollar: the projection for the exchange rate at the end of 2020 was stable at R$ 5.40. For the close of 2021, it remained at R$ 5.08 per dollar.
-Trade balance: for the balance of trade (result of total exports minus imports), the projection in 2020 rose from US$ 45.50 billion to US$ 47.75 billion positive result. For next year, market experts' estimates advanced from $45 billion to $47.35 billion in surplus.
-Foreign investment: the forecast of the report for the entry of foreign direct investments in Brazil in 2020 fell from US$ 64 billion to US$ 60 billion. For 2021, analysts' estimates were stable at $75 billion.
G1 - 08/06/2020 News Item translated automatically
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