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BRASILIA, March 22 (Reuters) - Brazil’s government on Friday cut its economic growth and inflation forecasts for this year, following a string of sub-par economic indicators that has provided mounting evidence that the recovery from the 2015-16 recession is losing steam.
In the same week the central bank struck an increasingly dovish tone in its latest policy statement, the government also lowered its average interest rate forecast for the year and outlook for the Brazilian real.
The government now sees the economy growing 2.2 percent this year, down from 2.5 percent previously, and forecasts inflation of 3.8 percent, down from 4.2 percent, the Economy Ministry said in its latest bi-monthly report on revenues and spending.
It now expects the central bank’s benchmark Selic rate to average 6.50 percent this year, its current record low where it has been for a year, down from 7.20 percent previously.
The dollar/real exchange rate is expected to average 3.70 this year, up slightly from 3.60 previously. That’s still indicating expectations the real will strengthen though, given the current exchange rate of 3.87 per dollar.
To counter an anticipated fall in revenues of 29.7 billion reais ($7.7 billion) this year, the government has set aside a contingency fund of 29.8 billion reais to guarantee it meets its fiscal goals, the report said. ($1 = 3.8731 reais) (Reporting by Marcela Ayres, writing by Jamie McGeever Editing by Chizu Nomiyama and Susan Thomas)