Monetary authority predicted a 5% fall in September; inflation is revised to 4.1% this year and 3.4% in 2021
O Banco Central (BC) reviewed the outlook for falling Gross Domestic Product (GDP) in 2020 to 4.4%, according to the Inflation Report for the fourth quarter released on Thursday, 17. In the previous edition, published in September, the monetary authority predicted a fall of 5%. The projection for 2021 was slightly downgraded to growth of 3.8%, compared to 3.9% previously estimated. “The revision of the historical GDP series, which produced an increase in interannual variations in the first two quarters of 2020, combined with the performance in the third quarter slightly better than anticipated, in the same metric, contributed to the increase in the estimate of annual variation. In the same vein, higher frequency indicators suggest a continuation of the recovery of economic activity in the fourth quarter, also at a higher pace than previously forecast ”, affirm the BC technicians.
The revision for the expectation of economic growth in the next year is justified by the continuity of the uncertainties brought by the new coronavirus pandemic and what are the impacts of the stoppage of activities. THE structural reform agenda and the necessary adjustments in the Brazilian economy were also taken into account for the downturn. “This change includes an increase in the statistical load after the revision of the projections for 2020 and the prospect of lower quarterly rates of change than forecast in the September Inflation Report. In part, this review reflects the anticipation of the expected economic recovery, at least for some sectors and demand components, for the year 2020. On the other hand, the lower quarterly growth
it is also a consequence of the slower recovery of the labor market and mobility indices. ”
The Central Bank also changed its projection for the Broad Consumer Price Index (IPCA), official indicator of Brazilian inflation, to advance 4.1%. In the September report, growth was projected at 2.1%. “The projections were particularly affected by the revisions to the short-term projections, impacted by the recent growth in inflation and its determinants. Specifically for 2020, the revision of the projection was driven by observed inflation of 1.44 pp higher than that forecast for the period between September and November and the high inflation projection for December, ”said the monetary authority. The Focus Bulletin, which compiles projections of analysts consulted by the BC, brought this Monday, 14, an estimate of a 4.3% advance in the IPCA this year. The two projections are above the center of the 4% target set by the National Monetary Council (CMN), with a margin to vary between 2.5% and 5.5%. In the 12 months ended in November, Brazilian inflation accumulated an increase of 4.3%. The BC report forecasts a 3.4% change in inflation in 2021, while the Bulletin Focus expects 3.3%. For 2021, the Central Bank expects a 3.4% increase in the IPCA, while Focus analysts project an increase of 3.3%.