Brazil’s Economy Analysts Expecting Lower Inflation in 2006

There has been a small change in the market mood in Brazil regarding future inflation. For the first time in a number of weeks, the market forecast for inflation fell in the latest Focus market survey by the Brazilian Central Bank, which polls some 100 market analysts and financial institutions.

Last week the market forecast for the final increase in the Broad Consumer Price Index (IPCA) for 2006 was 4.61%. This week it was 4.60%. The government target for 2006 is for an IPCA increase of 4.50%.

This week’s Focus survey found that the market now expects the country’s benchmark interest rate, the Selic, to be 15% annually at the end of the year.

Focus also found that the market believes government-controlled prices (mostly utilities, gasoline and health plans) will rise 4.5% in 2006.

As for GDP growth, for the 39th consecutive week the market said it would be 3.5% in 2006.

Primary Surplus

The Central Bank has released a report on the economy. Up to the end of November, the government was running a primary surplus of US$ 4.5 billion; the equivalent of 5.6% of GDP (for the sake of comparison, the primary surplus target for 2006 is 4.25% of GDP, or approximately US$ 37.9 billion).

Joaquim Levy, the head of the Secretariat of the National Treasury, reports that the final 2005 result will be superior to the government’s target because all the players, both the states and the federal government, have surpluses above last year’s target which was also 4.25% of GDP.

ABr

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