Brazilian Economists Forecast First GDP Contraction Since 2009

Brazil economists forecast gross domestic product will shrink this year for possibly the first time since 2009 as the central bank raises borrowing costs to slow above-target inflation.

Analysts forecast Brazil’s GDP will fall 0.42 percent in 2015 after estimating no change the previous week, according to the Feb. 13 central bank survey of about 100 analysts published today. They expect inflation to accelerate to 7.27 percent this year, up from the previous week’s estimate of 7.15 percent.

Latin America’s largest economy faces a decline in commodity prices, government austerity measures and a drought that is putting millions of people at risk of water and energy rationing. Consumer prices in the first month of 2015 expanded the most in nearly 12 years even as the central bank continues to raise interest rates to reach the official target of 4.5 percent by 2016.

The real strengthened 0.2 percent to 2.8298 per U.S. dollar at 12:00 p.m. local time Wednesday.

Policy makers last month boosted the benchmark interest rate a half-point to 12.25 percent, the third increase in a row. Analysts in the Feb. 13 survey expect borrowing costs to reach 12.75 percent this year before easing to 11.5 percent in 2016.

Brazil’s economy grew 0.1 percent in the third quarter over the three previous months after contracting in the first half of the year. The national statistics institute is scheduled to publish fourth-quarter GDP data next month. Economists estimate the economy will recover next year, with GDP expanding 1.5 percent, according to the survey.

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