May 11, 2020 / 12:29 PM / in 3 months

Consensus on Brazil 2020 GDP falls for 13th week, now past negative 4%

BRASILIA, May 11 (Reuters) - Brazil’s economy is expected to shrink by more than 4% this year, a weekly central bank survey of economists showed on Monday, with interest rates and inflation forecasts also being revised down to all-time lows.

The increasingly bleak projections reflect the impact on activity and output, prices and policy across Latin America’s largest economy resulting from the coronavirus pandemic and social isolation measures taken to combat it.

The average forecast for 2020 gross domestic product fell to -4.1% from -3.8% the week before, according to the central bank’s survey of around 100 financial institutions.

That would signal Brazil’s third biggest annual economic crash in at least half a century, according to central bank data, only behind the 4.25% fall in 1981 and 4.35% decline in 1990.

Several global investment banks have revised their 2020 GDP forecasts much lower in recent days, with Deutsche Bank, JP Morgan and Societe Generale now going for -6.2%, -7.0% and -7.4%, respectively.

The latest FOCUS survey also showed the ninth consecutive decline in inflation expectations for this year, now down to 1.8% from 2.0% the week before. The central bank’s official inflation goal for this year is 4.0%.

Next year’s inflation outlook was revised down to 3.25% from 3.50%, again further below the central bank’s official target of 3.75%.

The central bank cut its key Selic interest rate last week by a larger-than-expected 75 basis points to a record low and signaled it is ready to repeat the dose at its next meeting in June.

The FOCUS survey showed economists expect the Selic rate to end the year at 2.50%, down from 2.75% last week, and end next year at 3.50%, also a quarter percentage point lower than the week before.

The survey also showed another rise in the government’s expected primary budget deficit this year to 7.5% of GDP from 7.2% the week before, closer to the 8% suggested by Treasury and Economy Ministry officials recently.

The Economy Ministry is expected to officially announce its new GDP growth and budget forecasts later this week. (Reporting by Jamie McGeever; Editing by Steve Orlofsky)

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