Due to the effects of the coronavirus, the federal government again lowers its GDP estimate. The inflation forecast was lowered to 3.051TP3Q
The Ministry of Economy released its new forecast for Gross Domestic Product (GDP) growth this year in its budget expenditure report. Following a new revision by the federal government, the estimate, which was 2.1% for 2020, was reduced to 0.02%.
GDP is the sum of all goods and services produced in the country and serves to measure the evolution of the economy
This new revision of the GDP estimate was motivated by the effects caused by the coronavirus pandemic in the world, which is aggressively affecting economic activities.
According to a survey conducted by the Central Bank, last week the market estimated a 1.68% increase in GDP for 2020. However, some financial institutions are already forecasting a GDP contraction. This means a new economic slowdown will occur.
In 2019, according to data from the Brazilian Institute of Geography and Statistics (IBGE), GDP grew 1.1%. This was the weakest performance in the last three years. Growth was mainly affected by the slowdown in household consumption and private investment. In 2017 and 2018, growth in both years was 1.3%.
Inflation
According to a forecast by the Secretariat of Economic Policy, the estimate for the Broad National Consumer Price Index (IPCA), the official inflation indicator, rose from 3.12% to 3.05% this year. Last week, the financial market predicted an IPCA of 3.10% for 2020.
Market inflation expectations for 2020 remain below the central target of 4%. The target tolerance range ranges from 2.5% to 5.5%.
This inflation target is determined by the National Monetary Council (CMN). To achieve it, the Central Bank raises or lowers the Selic rate, the economy's benchmark interest rate.
Last year, the Broad National Consumer Price Index (IPCA), considered Brazil's official inflation rate, closed at 4.31%, above the center of the target for the year, which was 4.25%. This was the highest annual inflation rate since 2016.