Brazil economists cut their 2014 economic growth forecast to the lowest all year, as inflation pressured by a weaker real saps purchasing power in the world’s second-biggest emerging market.
Brazil’s gross domestic product will expand 2.13 percent next year, compared with the previous week’s forecast of 2.20 percent, according to the Oct. 25 central bank survey of about 100 analysts published today. Economists maintained their 2013 growth forecast from the previous week at 2.50 percent.
President Dilma Rousseff’s administration is seeking to rein in consumer price increases while sparking economic growth that has trailed economists’ estimates in five of the last six quarters. Near-record low unemployment and government stimulus have been undercut by flagging confidence and inflation running above target for the third straight year. Central bankers on Oct. 9 raised the benchmark rate by 50 basis points to 9.50 percent and later signaled in the meeting minutes that they will extend world’s biggest tightening cycle.
Swap rates on the contract due in January 2015, the most traded in Sao Paulo today, fell one basis point, or 0.01 percentage point, to 10.46 percent at 9:02 local time. The real strengthened by 0.22 percent to 2.1823 per U.S. dollar, and has weakened 6 percent this year.
Brazilian consumer prices in mid-October accelerated for the third straight month, even as annual inflation slowed to 5.75 percent, the lowest since November. Inflation has remained above the central bank’s 4.5 percent target every month since August, 2010.
The bank has raised the benchmark Selic by 50 basis points in the past four monetary policy meetings following a 25-point boost in April. In a statement published after their Oct. 9 monetary policy meeting, central bankers said the decision will help stem inflation.
Economists in the central bank survey forecast inflation will accelerate to 5.92 percent in 2014 from 5.83 percent this year, compared with last week’s estimates of 5.94 percent and 5.83 percent, respectively.
Total economic activity in August rose 0.08 percent, compared with analysts’ estimates of 0.2 percent growth, the central bank said on Oct. 16. While retail sales that month surpassed economists’ estimates, industrial output unexpectedly was flat.
The central bank expects gross domestic product to expand 2.5 percent this year. Brazil’s economy grew by 0.9 percent last year and 2.7 percent in 2011.