Itaú BBA - Activity loses momentum

Brazil Scenario Review

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Activity loses momentum

mayo 13, 2019

We lowered our growth forecasts for 2019 and 2020. We also expect Selic rate cuts ahead, conditional to the approval of the pension reform.


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

 

• We lowered our growth forecasts for 2019 (to 1.0% from 1.3%) and 2020 (to 2.0% from 2.5%). Recent developments reinforce our view that the fiscal adjustment and cuts in credit subsidies have contributed to a decline in the neutral interest rate.

• We revised our estimate for the primary budget deficit in 2019 to 0.8% of GDP (from 1.5%), after accounting for the expected extraordinary revenues from the transfer-of-rights oil auction (cessão onerosa). For 2020, our deficit forecast changed to 1.1% of GDP, from 1.0%. The scenario is strictly dependent on the approval of the pension reform, whose fiscal impact should represent 50% to 75% of the impact outlined in the government’s proposal.

• Our year-end exchange rate forecasts are unchanged at BRL/USD 3.80 in 2019 and 3.90 in 2020.

• We maintain our inflation forecasts at 3.6% for 2019 and 2020.

• Monetary policy: weak activity and low inflation could pave the way for interest rate cuts, but it will depend on the approval of the pension reform. 


 

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



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