Brazil economists cut their 2014 economic growth forecast below 2 percent for the first time, as the central bank signals it will continue to raise rates to tame above-target inflation.
Brazil’s gross domestic product will expand 1.95 percent this year, down from the previous week’s forecast of 2 percent and from an estimate of 3.8 percent last February, according to the Jan. 3 central bank survey of about 100 analysts published today. Analysts also reduced their 2013 growth projections to 2.28 percent from 2.30 percent last week.
Policy makers in Latin America’s largest economy are working to fulfill pledges of faster growth and slower inflation. President Dilma Rousseff’s government has said it will continue to auction billions of dollars in highway and port projects in efforts to drive investments. At the same time, central bankers have lifted the key rate by 275 basis points in the past year as a weaker currency continues to pressure prices.
Swap rates on the contract due in January 2015, the most traded in Sao Paulo today, rose one basis point, or 0.01 percentage point, to 10.55 percent at 9:02 local time. The real was little changed at 2.3773 per U.S. dollar.
The central bank on Dec. 20 cut its 2013 growth estimate to 2.3 percent from 2.5 percent after gross domestic product fell 0.5 percent in the third quarter on a drop in investments.
Brazil’s investments are growing and will be driven by infrastructure auctions, Finance Minister Guido Mantega said on Jan. 3. Tax receipts are rising because economic activity is picking up, and the country can expand exports this year as global economic growth increases, Mantega said.
Annual inflation in 2013 remained above the 4.5 percent mid-point of the central bank’s target range for the fourth straight year, according to the median estimate of 14 economists surveyed by Bloomberg, which shows prices accelerated 5.82 percent. The national statistics agency will release the official figure on Jan. 10.
Inflation has been fueled in part by a weaker real, which fell 13 percent in 2013 on deteriorating fiscal accounts and speculation the Federal Reserve would curb monetary stimulus.
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