Itaú BBA - Slower growth, interest rate cuts depend on reforms

Brazil Scenario Review

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Slower growth, interest rate cuts depend on reforms

April 12, 2019

We reduced our GDP growth forecasts for 2019 (to 1.3%) and 2020 (to 2.5%), and now expect the Selic rate at 5.75% in 2019 and 5.5% in 2020.


Please open the attached pdf to read the full report and forecasts.

• We reduced our GDP growth forecasts for 2019 (to 1.3% from 2.0%) and 2020 (to 2.5% from 2.7%), incorporating weaker data and signs of a slowdown at the margin.

• Our estimates for the primary budget deficit worsened to 1.5% of GDP from 1.4% in 2019 and to 1.0% from 0.9% in 2020. This scenario is strictly dependent on the approval of the pension reform.

• Our year-end forecasts for the exchange rate are unchanged at 3.80 reais per dollar in 2019 and 3.90 in 2020.

• We expect the IPCA to rise 3.6% in both 2019 and 2020.

• Also strictly conditional on the approval of the pension reform, we now expect the Selic benchmark interest rate to drop to 5.75% in 2019 and 5.5% in 2020, in response to the sluggish recovery in economic activity.

 

Please open the attached pdf to read the full report and forecasts.



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