Brazil Optimistic: Central Bank Raises Growth Expectations

Brazil Optimistic: Central Bank Raises Growth Expectations

Brazil Central Bank expects a partial economic recovery after a sharp downturn in 2020Q2, according to a press release. Economic growth uncertainty larger than usual, concurrently with the unwinding of emergency programs at year-end. Transfers and government programs facilitating recovery above other emerging economies.

  • Growth:
    • Raises 2020 GDP from -6.4% to -5.0%
    • Sets 2021 GDP growth at 3.9%
  • Inflation:
    • Raises 2020 CPI from 1.9% to 2.1% 
    • Maintains 2021 CPI at 3.0% to 2.1 % 
    • Raises 2022 CPI from 3.6% to 3.8%
  • Selic rate maintained at 2.00% p.a.
  • Economic slack may produce a lower-than-expected inflation trajectory, especially the service sector. 
  • Fiscal response to pandemic may raise the risk premium.
  • Transfer and credit programs may cause a smaller-than estimated fall in aggregate demand. 
  • Sustaining the reforms and adjustments is essential in economic recovery.

Brazilian Gross Domestic Product (GDP) was down 9.7% in 2020Q2, the sharpest historical decline. USDBRL is up 0.07%

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