UPDATE 1-Brazil's economy to shrink 3 pct this year, recover feebly- poll
(Adds background, forecast made in 2015) BRASILIA, Jan 11 (Reuters) - Economists downgraded their outlook for Brazil's economy in 2016 and 2017, a weekly survey by the central bank showed on Monday, projecting a slower recovery from what is already set to be the country's worst recession ever. The median estimate of about 100 analysts at financial institutions projected a contraction of 2.99 percent in Brazil's gross domestic product in 2016, down from a previous forecast of 2.95 percent. That follows an estimated drop of nearly 4 percent in 2015. Brazil's economy is expected to grow just 0.86 percent in 2017, down from a previous estimate of 1.00 percent, the poll showed. Brazil has not had two consecutive years of such intense downturn since at least 1901, according to historical data by the national economic research institute IPEA. Latin America's largest economy has nosedived after a ballooning budget deficit and high inflation prompted President Dilma Rousseff and the central bank to raise taxes, cut spending and jack up interest rates last year. Rousseff's popularity collapsed, leading to a political crisis that paralysed investments as business confidence tanked. The economy has also been dragged down by a massive corruption scandal at state-run oil firm Petroleo Brasileiro SA , one of the country's largest companies, as it struggled with a drop in global oil prices. Executives from top construction, engineering and financial companies are under investigation or in jail. The central bank poll also showed a slight increase in inflation expectations for 2016, suggesting the central bank will overshoot for as second straight year even as it is expected to raise interest rates to 15.25 percent from a current nine-year high of 14.25 percent. (pct) 2016 2017 previous new previous new forecast forecast forecast forecast Consumer inflation 6.87 6.93 5.20 5.20 Exchange rate 4.21 4.25 4.20 4.23 (reais per U.S dollar, end-period) Interest rate 15.25 15.25 12.50 12.75 (end-period) GDP growth -2.95 -2.99 1.00 0.86 Industrial output -3.50 -3.45 2.00 1.98 (Reporting by Silvio Cascione; Editing by Daniel Flynn and Chizu Nomiyama)
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