March 11, 2020 / 1:26 PM / in a month

UBS slashes Brazil 2020 GDP growth forecast to 1.3%, one of the lowest among big banks

BRASILIA, March 11 (Reuters) - Economists at Swiss investment bank UBS have slashed their forecast for Brazil’s economic growth this year to 1.3% from 2.1% previously, one of the gloomiest outlooks among a clutch of recent downward revisions from the world’s big banks.

In light of the economic and financial market shocks from the coronavirus outbreak and sharp fall in oil prices, UBS cut its 2020 forecast and also revised down its estimate for official interest rates to 3.5%.

UBS economists Tony Volpon and Fabio Ramos outlined a base-case scenario where tightening financial conditions hit Brazilian growth hard in the second quarter, but the economy rebounds later in the year if China recovers, as expected.

Under this scenario, growth will snap back to 3.2% next year, up from their previous forecast of 2.8%.

In a worst-case scenario, where the coronavirus outbreak wreaks deeper and longer-lasting economic damage, Brazil’s growth will shrink this year to 0.7%, they predict.

Economists at several big banks, such as JP Morgan, Bank of America Merrill Lynch, and Citi have cut their Brazilian growth forecasts in recent weeks to well below 2.0%, but not quite as low as UBS’ prediction. (Reporting by Jamie McGeever Editing by)

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