Central bank low predicts about 5% drop in the Brazilian economy

The new estimates are in line with the projections of market agents consulted weekly by the Central Bank, which forecasts an economic retraction of 5,05% in the Brazilian GDP in 2020. Brazil is still recovering from a severe recession between the years 2015 and 2016 , a period in which GDP fell seven percentage points.

Brazil

The Central Bank of Brazil reduced this Thursday its projection on the contraction of the country's Gross Domestic Product (GDP), which went from 6,4% to 5%, at the same time that it raised the inflation projection for this year from 1,9% to 2,1%.

The new projections were presented in the Central Bank's Quarterly Inflation Report, which highlighted that the country's economic activity showed a “partial recovery” after months of paralysis of the productive sectors due to the covid-19 pandemic.

The Brazilian government agency estimated that the country is recovering “relatively faster than other emerging countries”.

The report that brings the new projections justified that government measures to combat the economic impacts of the pandemic and the gradual resumption of consumption levels in force before the period of social isolation explain the improvement in the Brazilian economic scenario.

The new estimates are in line with the projections of market agents consulted weekly by the Central Bank, which forecasts an economic retraction of 5,05% in the Brazilian GDP in 2020.

The Central Bank acknowledged, however, that uncertainty about the pace of the country's recovery will remain “above the usual” in the last quarter of the year, largely due to the end of economic aid granted to millions of Brazilians who lost income in an attempt to mitigate the effects of the economic crisis that accompanied the pandemic.

Regarding inflation, the Brazilian Central Bank revised its projections upwards, which went from 1,9% per year, in the previous report released in June, to 2,1% in the report released on Thursday.

Despite the review, the new projection remains well below the 4% target set by the Government for 2020.

For 2021, the Brazilian Central Bank foresees a 3,9% growth in GDP, a projection that is conditional on the continuity of economic reforms and the maintenance of fiscal adjustment to balance public accounts. Inflation is expected to end 2021 with a 3% growth.

Brazil is still recovering from a severe recession between the years 2015 and 2016, a period in which the country's Gross Domestic Product (GDP) fell seven percentage points.

In the last year, Brazilian GDP grew 1,1%, a rate lower than the 1,3% expansion registered in the years 2017 and 2018.

The emergence of covid-19 frustrated the growth expectations projected for the largest economy in South America in this, when growth of 2,5% was expected.

In the first two quarters of 2020, Brazil entered a technical recession, registering a 1,5% drop in GDP between January in March and a 9,7% decline between April and June.

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