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Brazil's recession expected to continue next year according to top bank

Thursday, July 23rd 2015 - 08:52 UTC
Full article 34 comments
Ilan Goldfajn  forecasts a drop of 2.2% in 2015 and 0.2% in 2016, down from previous estimates a 1.7% decline in 2015 and an increase of 0.3% in 2016. Ilan Goldfajn forecasts a drop of 2.2% in 2015 and 0.2% in 2016, down from previous estimates a 1.7% decline in 2015 and an increase of 0.3% in 2016.
Consensus estimates for economic growth will probably continue to worsen despite efforts by Finance Minister Joaquim Levy to restore market confidence Consensus estimates for economic growth will probably continue to worsen despite efforts by Finance Minister Joaquim Levy to restore market confidence
The austerity measures taken by President Dilma Rousseff's administration have put the brakes on economic activity and led to higher unemployment The austerity measures taken by President Dilma Rousseff's administration have put the brakes on economic activity and led to higher unemployment

Brazil's recession will extend into next year, hurting President Dilma Rousseff's efforts to shore up public finances and arrest a sharp increase in unemployment, Itau Unibanco's chief economist said in a report on Wednesday. Ilan Goldfajn forecasts a drop of 2.2% in 2015 and 0.2% in 2016, down from previous estimates for a decline of 1.7% in 2015 and an increase of 0.3% in 2016.

 The revision suggests that consensus estimates for Brazil's economic growth will probably continue to worsen in coming weeks despite efforts by Finance Minister Joaquim Levy to restore market confidence. The median forecast of economists last week was for Brazil's economy to grow 0.5% in 2016, according to a weekly central bank survey.

“Leading and coincident indicators suggest that the declining trend in economic activity may last longer, and be stronger, than we expected,” Goldfajn said in his note.

Itau Unibanco expects Brazil's unemployment rate to climb to 8.0% this year and 9.0% in 2016. The bank also expects Brazil to miss its main budget target in both years, with a primary budget surplus of just 0.5% in 2015 and 1.0% in 2016.

Inflation will probably remain above the center of the government's target of 4.5%, settling to 5.3% at the end of 2016. Still, signs of slower inflation in 2017 should allow the central bank to cut its benchmark rate from an expected 14.25% at end-2015 to 11.25% in 2016, Goldfajn forecasted.

In related news analysts expect Brazil's economy to contract by 1.70% this year, with the inflation rate reaching 9.15%, the Central Bank said. GDP and inflation estimates come from the Boletin Focus, a weekly Central Bank survey of analysts from about 100 private financial institutions on the state of the national economy.

Analysts surveyed for the previous edition of the Boletin Focus had expected Latin America's largest economy to contract by 1.50%. The government has revised its GDP estimate for this year to a contraction of 1.20%, which would be Brazil's worst economic performance since 1990.

The austerity measures taken by President Dilma Rousseff's administration have put the brakes on economic activity and led to higher unemployment, with the jobless rate rising to 6.7% in May from 4.8% at the end of 2014. Economic activity contracted by 2.64% during the first five months of this year, the Central Bank said in a report released last Friday.

Categories: Economy, Politics, Brazil.

Top Comments

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  • ilsen

    Vote Dilma! Vote PT!

    Ummm. .. no. That is not working out so well anymore.
    :-(

    Jul 23rd, 2015 - 11:20 am 0
  • yankeeboy

    Cue junk bond status.

    I said many years ago all the reforms that were made in the 90s would be lost by Lula/Dilma shortly.

    another one bites the dust

    Jul 23rd, 2015 - 11:29 am 0
  • Conqueror

    So it's a recession! How much of the money stolen through Petrobras and construction companies might be recovered? Election campaigns are expensive though, aren't they? Especially if you have to fly all over a country the size of Brazil.
    “busying himself with expanding the Workers' Party organizations around the country”
    Did he fly first-class everywhere he went or did he just buy an aircraft? Plenty of union funds to dip into.

    Jul 23rd, 2015 - 02:59 pm 0
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