Brazil Lowers GDP Expectations from 4% to 3.12%

Brazil’s Gross Domestic Product (GDP), which represents the sum of wealth produced in the country, will continue to grow this year, but according to a Central Bank (BC) poll, at a substantially slower pace than was indicated by official projections made at the start of the year.

According to the most recent Focus survey, conducted by the BC on Friday, June 10, GDP growth in 2005 will be 3.12%, down from the 3.27% registered in the previous poll.

Earlier this year, forecasts released by the Brazilian government talked about a 4.00% growth in GDP for the year. For 2006, the forecast continues to be for 3.50% growth.

Despite the pronounced drop, the prognosis is still higher than the 2.8% announced last week by the Institute of Applied Economic Research (Ipea), linked to the Ministry of Planning, Budget, and Management.

According to the BC study, released today, the growth prospects for industrial production improved somewhat in relation to last week’s predictions, from 4.08% to 4.14% for this year and 4.35% to 4.50% for next year.

The forecast for the ratio between net government debt and the GDP was maintained at 51.40% for this year and raised from 50% to 50.50% for 2006.

The Focus Bulletin predicts a higher surplus in the current account, which includes all commercial and financial transactions with foreign countries.

According to the hundred financial institutions and market analysts who were interviewed, this year’s surplus should amount to US$ 9.20 billion (as against US$ 9 billion in the previous poll).

The survey maintained the projection of US$ 35 billion for this year’s trade surplus and US$ 29 billion for next year’s.

The forecasts for foreign direct investments this year and next also remained unchanged at R$ 15 billion in both cases.

There were also no alterations in the foreign exchange outlook, with projections for the American dollar to be quoted at R$ 2.67 at the end of this year and R$ 2.85 at the end of 2006.

The analysts also believe that the government’s annualized overnight benchmark interest rate (Selic), which presently stands at 19.75%, will be gradually reduced to 18% this year and 15.50% by the end of 2006.

Agência Brasil

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