Economists Lower Brazil’s 2005 GDP Growth Forecast to 3.27%

Brazil’s industrial production is showing signs of losing ground relative to the growth achieved in 2004.

In the opinion of analysts consulted last Friday, June 3, by the Central Bank (BC), production should increase 4.08% this year, down from last week’s estimate of 4.27% and the 4.50% estimate made early in May. They raised their forecast for 2006, however, from 4.20% to 4.35%.


Declining expectations also affect perspectives for growth in the Gross Domestic Product (GDP), the sum of all wealth produced in the country.


The previous prediction of 3.50% for this year’s GDP growth was lowered to 3.27%, according to the BC’ s Focus Bulletin. The forecast for GDP growth in 2006 remained unchanged at 3.50%.


On the other hand, there is an improvement in the indicators referring to the ratio between net government debt and the GDP.


The previous forecast predicted that this debt would correspond to 51.50% of the GDP at the end of 2005. This projection now stands at 51.40%.


With regard to 2006, the projections were reduced even more, from 50.5%¨to 50%.


The Focus Bulletin maintained its expectations for this year’s trade balance surplus at US$ 35 billion and next year’s at US$ 29 billion.


The estimate of US$ 9 billion for the current account surplus, which involves all commercial and financial transactions with foreign countries, also remained unchanged, while predictions for the current account balance in 2006 showed some improvement in the week-to-week comparison, from US$ 3.25 billion to US$ 3.78 billion.


According to the market analysts consulted by the BC, the benchmark overnight interest rate (Selic) will not be altered this month, remained at its current 19.75%.


They nevertheless expect the rate to be gradually reduced to end the year at 18%, and they are counting on it to fall to 15.50% next year.


As for the exchange rate, the Focus Bulletin once again lowers its forecast for the price of the US dollar, which is expected to end 2005 quoted at R$ 2.67, down from last week’s prediction of R$ 2.70.


The downward trend is also apparent in the lowering of predictions for the value of the dollar at the end of 2006, from R$ 2.90 to R$ 2.85.


Agência Brasil

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