Itaú BBA - Softer growth and lower inflation

Brazil Scenario Review

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Softer growth and lower inflation

February 8, 2019

We reduced our GDP growth forecasts for 2018 (to 1.1% from 1.3%), 2019 (to 2.0% from 2.5%) and 2020 (to 2.7% from 3.0%)

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

• We reduced our GDP growth forecasts for 2018 (to 1.1% from 1.3%), 2019 (to 2.0% from 2.5%) and 2020 (to 2.7% from 3.0%), incorporating a weaker performance in 4Q18, less favorable supply conditions in the Agricultural and Electricity sectors and slower global growth.
 

• We forecast primary budget deficits of 1.3% of GDP for 2019 and 0.8% of GDP for 2020. This scenario is strictly dependent on the approval of the pension reform, which we expect will have a similar fiscal impact as the version that recently ran through Congress.

• We revised our year-end forecasts for the exchange rate to BRL 3.80 per USD in 2019 (from 3.90) due to a more benign international scenario, and we kept our estimate for 2020 at 3.90.

• Our inflation estimates were reduced to 3.6% for 2019 and 2020.

• We expect the Monetary Policy Committee (Copom) to keep the benchmark Selic rate stable, at 6.5% p.a. in its next meetings, but this call entails more uncertainty than usual.

 

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



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