Brazil’s economy will grow below 3 percent in 2013, economists predicted for the first time in a central bank survey of about 100 analysts published today.
Latin America’s largest economy will grow 2.98 percent this year, down from the previous week’s projection of 3 percent. It would be the first time in a decade that Brazil grows below 3 percent for three consecutive years.
Brazil’s economy has struggled to recover from last year’s expansion of 0.9 percent as accelerating inflation undermines consumer demand. While economists raised their 12-month inflation forecast to 5.64 percent from 5.57 percent, they maintained their projection for inflation this year and next at 5.8 percent, according to the survey.
The central bank raised the benchmark interest rate in April to 7.5 percent after keeping it at a record low 7.25 percent since October. Economists project GDP will accelerate to 3.5 percent next year.
President Dilma Rousseff’s government is trying to boost investments in infrastructure and is reducing taxes as it seeks to accelerate growth without further stoking inflation.
Economists expect policy makers will lift the Selic rate to 8.25 percent by year-end in a bid to slow inflation that is close to the upper end of the 2.5 percent to 6.5 percent target range. Inflation slowed to 6.49 percent in April.
“The central bank is vigilant and will do what’s needed, in a timely way, to put inflation in a declining trend in the second half, and to ensure that that trend will continue next year,” central bank President Alexandre Tombini said May 16.