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Brazil's central bank predicts 3.3 pct economic contraction for 2016

RIO DE JANEIRO
2016-09-28 10:18

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Brazil's economy will contract by 3.3 percent in 2016 and grow 1.3 percent in 2017, said a quarterly report on economic projection published Tuesday by the Brazilian Central Bank (BCB).

According to the report, Brazil will register two consecutive years of economic contraction, after the gross domestic product (GDP) fell 3.8 percent in 2015.

The BCB's predictions are slightly less positive than those of the financial market as they predicted a 3.14-percent economic contraction on Monday for 2016, with economists' predictions being the same as the BCB's for 2017.

The inflation rate will be 7.3 percent for 2016, higher than the government's target of 4.5 percent with a limit of 6.5 percent, said the report.

In 2015, Brazil's inflation rate reached 10.67 percent, the highest level since 2002. For 2017, the inflation rate is projected at 4.4 percent, slightly less than the 5.07 percent predicted by the financial market and the 4.7 percent that the BCB predicted in June. The figure is slightly lower than the government's 4.5-percent target for 2017 established by the central bank.

The basic interest rate remains unchanged at 14.25 percent after the last increase made by the BCB's Monetary Policy Committee in September 2015.

The central bank decided its latest level, the highest in a decade, as a way to curb inflation while the financial market expects it to drop 0.5 percent between September and December.

The BCB's forecasts are slightly less optimistic than those of President Michel Temer's government, which expects a 3.1-percent economic contraction and 7.2-percent inflation for 2016.

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