World Economy

Brazil GDP Forecast Reduced

Brazil GDP Forecast ReducedBrazil GDP Forecast Reduced

Brazil’s real declined the most among regional currencies on worsening prospects for the economy as President Dilma Rousseff fights attempts to impeach her.

The real dropped 0.5% to 3.89 per dollar in Sao Paulo, on course for its lowest level on a closing basis since Oct. 28, Bloomberg reported.

The real is the worst performer among 31 major currencies as Rousseff struggles to find support for measures to reduce the deficit and avoid additional credit-rating cuts while her popularity plunges and the economy shrinks.

Analysts in the central bank’s weekly survey expect Brazil’s economy to contract 2.67% in 2016, compared with a forecast for a 2.31% drop last week.

“The mounting political turmoil is definitely not helping the government to address the fiscal gap and is even dragging out the potential recovery further with the Brazilian real expected to remain under pressure,” said Arnaud Masset, an analyst at Swissquote Bank SA in Gland, Switzerland.

Economists in the central bank survey expect policymakers to increase the benchmark rate to at least 14.5% next year, compared with the previous week’s forecast of 14.25%.

Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in Brazil’s interest rates, rose 0.06 percentage point to 16.05%.

The surveyed economists raised their estimate for the inflation rate in 2015, as measured by the consumer-price index, to 10.61% from 10.44%. They also increased their inflation-rate estimate for next year, to 6.80% from 6.70% expected previously.

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