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Slow growth rate: 2014 declared disappointing year for Brazil economy

Slow growth rate: 2014 declared disappointing year for Brazil economy

SAO PAULO: The economic growth of Brazil continue to decrease in 2014, said in the Central Bank of Brazil report released here the other day. Central Bank forecaste the annual GDP growth for 2014 at 0.2 percent. The estimate is higher than market estimates, which call for a growth of 0.13 percent for 2014.

Not even mega events, such as the World Cup in June helped Brazilian economic growth, an official told Customs today.

This is the third time the institution has decreased its economic growth forecast this year. During the first quarterly report, in March, the GDP growth forecast was at two percent, falling to 1.6 percent in June, at the second report, and declining once again to 0.7 percent in September at the third quarterly report. If this latest forecast is confirmed, it will be the lowest economic growth for the country since 2009.

In this latest report the BC forecasts the IPCA (Consumer Price Index) at 6.4 percent this year, declining to 6.1 percent in 2015 and totaling five percent in 2016. Although this final inflation forecast for 2014 is above the center of the target (4.5 percent) it is still just below the high limit of 6.5 percent. Market forecasts call for inflation above 5.5 percent until 2018.

The government entity also estimates the foreign exchange rate to close the year at R$2.55/US$ and the Selic (benchmark interest rate) at 11.75 percent per year. Although no hint as to whether or not the BC’s Monetary Policy Committee (COPOM) will increase the Selic even further at the beginning of 2015, the report states “the monetary policy should remain vigilant so as to minimize the risks that high inflation levels, as seen in the last twelve months, will persist in the horizon. The Committee will do what is necessary so that next year inflation will register a long period of decline, which will take it to 4.5 percent in 2016”.

According to daily newspaper O Globo, the market estimates that the Selic, one of the instruments used by the BC to keep inflation down, will increase a few more times during the first semester of 2015, to twelve percent in January, 12.25 percent in March and 12.50 percent in April.