Brazil Economists Trim Economic Growth Outlook for 2016 and 2017

  • Focus survey shows 2017 inflation falling to 5 percent
  • Central bank struck cautious tone when lowering Selic rate

Economists reduced their growth forecast for Brazil next year to its lowest level in two months, underscoring how Latin America’s largest nation is struggling to emerge from recession.

Gross domestic product will expand 1.23 percent in 2017, according to a central bank survey of economists, down from their prediction of 1.3 percent the week before. That marks only the second reduction to the growth outlook since mid-April. They also reduced their 2017 inflation forecast for the third straight week, to 5 percent.

Economists trimmed their growth forecast even as the central bank last week embarked upon an easing cycle expected to run through most of next year. The monetary authority lowered the benchmark rate from its highest level in a decade, but struck a cautious tone. Policy makers say they need more confidence in the trajectory of inflation and clarity on the passage of proposed fiscal measures to increase the pace of easing.

Economists also lowered their forecast for 2016 GDP to a 3.22 percent contraction. That, combined with last year’s 3.8 percent fall, would be Brazil’s worst two-year recession on record dating back more than a century, according to the government’s economic research institute, Ipea.

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