World Economy

Brazil Outlook Slides Further

Brazil Outlook Slides FurtherBrazil Outlook Slides Further

Economists sharply increased their estimates for Brazil’s economic contraction in 2015 and 2016 after third-quarter GDP came in lower than expected last week, a weekly central bank poll showed on Monday.

The median estimate of about 100 economists projected Brazil’s gross domestic product to fall 3.50% in 2015 and 2.31% in 2016, in the longest downturn of Latin America’s largest economy since the 1930s, from 3.19 and 2.04% in the prior week’s survey, Reuters reported.

Brazil’s economy shrank 1.7% in the third quarter from the previous three months, government statistics agency IBGE said last week. The surveyed economists raised their estimate for the inflation rate in 2015, as measured by the consumer-price index, to 10.44% from 10.38%.

They also increased their inflation-rate estimate for next year, to 6.70% from 6.64% expected previously.

The economists raised their outlook for the benchmark Selic interest rate at the end of 2016 to 14.25% from 14.13%. The rate is currently at 14.25%.

They also forecast Brazil to record a $15 billion trade surplus in 2015, the same level they had expected in last week’s survey.

Meanwhile, strong winds are forecast for Brazil’s already turbulent economy and there’s no chance of sunshine before resolution of President Dilma Rousseff’s impeachment battle, market observers say.

The initial reaction to the launching of the impeachment process last Wednesday was a euphoric jump in the Sao Paulo stock market, up 5% at one point before closing with its best performance of the year up 3.29%.

Markets are disappointed with Rousseff’s managing of the economy. Brazil is in deep crisis now, with inflation more than double the government target of 4.5%, a GDP shrinking 4.5% year-on-year, and unemployment rising inexorably.