BRASILIA (Reuters) – Brazil’s economy is expected to shrink by more than 5% this year, a weekly central bank survey of economists showed on Monday, which would be the biggest annual downturn since records began in 1900.
The new consensus forecast of -5.1% is sharply down from the previous week’s forecast of a contraction of 4.1%, and marks the 14th consecutive downgrade as the economic impact from quarantine and social isolation measures to combat the coronavirus outbreak becomes clearer.
The weekly ‘FOCUS’ survey of around 100 economists also showed further declines in the outlook for interest rates and inflation to fresh historic lows.
The latest FOCUS survey showed the 10th consecutive decline in inflation expectations for this year, to 1.6%, which would be marginally lower than the trough of 1.65% in late 1998 and early 1999.
The central bank’s official inflation goal for this year is still 4.0%.
The central bank is expected to cut its key Selic interest rate by a further 75 basis points this year to a record low 2.25%, the survey showed, down from last week’s average forecast of 2.50%.
The central bank has indicated it will lower rates by as much as 75 basis points at its next meeting in June, but that will be the end of the easing cycle.
The survey also showed growing bearishness on the exchange rate. Economists now expect Brazil’s real currency to be worth 5.28 per dollar at the end of this year, compared with last week’s average forecast of 5.00 per dollar, and 5.00 per dollar next year compared with 4.83.
(Reporting by Jamie McGeever; Editing by Paul Simao)