Market Analysts Keep Saying Brazil’s GDP Won’t Grow Over 3.5%

The Focus Bulletin, issued this Monday, February 20, by Brazil’s Central Bank (BC), indicates that market analysts and representatives of financial institutions are more optimistic regarding prospects for a reduction in the benchmark interest rate (SELIC), which is used by banks as a reference for the interest they charge on personal and business loans.

In their responses to last Friday’s, February 17,  BC poll, the analysts predicted that the rate will drop to 14.75% by the end of the year, compared with their prediction of 15% in last week’s edition.

As they have been doing for the last 42 weeks, the analysts stuck with the figure of 3.5% as their projection for this year’s growth in the Gross Domestic Product (GDP), the sum of the wealth produced in the country. Nevertheless, they raised their projection for next year’s GDP growth from 3.5% to 3.6%.

They lowered their forecasts for the ratio between government debt and the GDP from 50.5% to 50.45% for this year and from 48.9% to 48.8% for 2007.

This ratio is used by banks and other financial institutions in their evaluation of a country’s ability to honor its financial obligations. The lower the ratio, the greater the market’s confidence in the government.

The Focus Bulletin also puts the trade balance (exports minus imports) at US$ 40 billion in 2006 and US$ 35.5 billion in 2007 (up from the previous week’s figure of US$ 35 billion).

This increase had a positive effect on the forecast for the surplus in the country’s current account, which involves all its external commercial and financial transactions.

This year’s estimated surplus remained unchanged at US$ 9 billion, while the estimate for next year’s surplus rose from US$ 5.25 billion to US$ 5.6 billion.

The BC poll kept this year’s projected growth in industrial production at 4% and raised next year’s projected growth slightly, from 4.13% to 4.38%.

There was also no change in the US$ 15 billion forecast for foreign direct investment in the productive sector this year, with prospects of an increase to US$ 16.3 billion in 2007.

Agência Brasil

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