BRASILIA, June 24 (Reuters) - The outlook for Brazil’s economy continues to deteriorate, according to economists surveyed by the central bank, who cut their growth forecasts for the 17th week in a row to a new low of 0.87%.
The average forecast from around 100 financial institutions, the bank said on Monday, is down from 0.93% the week before and almost two percentage points lower than when President Jair Bolsonaro took office in January amid a wave of economic optimism.
The economy shrank in the first quarter and indicators suggest it has struggled to bounce back in the second quarter. Two consecutive quarterly contractions would mean Brazil is back in recession.
Economists kept their 2020 GDP growth forecast at 2.20%, the survey showed.
The central bank’s latest weekly FOCUS survey comes after the bank’s rate-setting committee, Copom, left interest rates on hold at a record low 6.50% but signaled it could soon cut them once uncertainty hanging over pension reform is lifted.
A government economic reform bill winding its way through Congress aims to generate savings of around 1 trillion reais ($262 billion) over the next decade by overhauling the country’s social security system. Passage of reform legislation could remove one of the few sources of upward pressure on inflation and allow the central bank to ease policy.
The FOCUS survey also showed economists trimming their end-2019 average inflation forecast for the fourth week in a row to 3.82% - well below the central bank’s official 4.25% target - and lowering their average end-2020 forecast for the first time to 3.95%.
Economists kept their average year-end 2019 projection for central bank interest rates at 5.75% and average year-end 2020 call at 6.50%, having cut them aggressively the week before. (Reporting by Jamie McGeever; Editing by by Steve Orlofsky)