Brazilian markets brace for lower growth, higher inflation in 2021

. Feb 22, 2021
gdp Brazilian markets brace for lower growth, higher inflation in 2021 Fuel prices are rising fast in Brazil. Photo: Roberto Parizotti/FP

Economic expectations have deteriorated in the past week, according to the Focus Report, a weekly Central Bank survey of top-rated investment firms. Expectations have now fallen for three consecutive weeks, reversing the bullish trend seen at the beginning of the year.

Financial institutions forecast GDP growth at just 3.29 percent in 2021, which would not be enough to reverse pandemic-led losses suffered in 2020. Per the Central Bank’s economic activity index, Brazil’s GDP shrank by 4 percent last year; official figures will be released on March 3. 

Despite the anemic growth, inflation is expected to pick up. Markets expect a 3.85-percent increase to the consumer price index (IPCA), pushing benchmark interest rates to 4 percent by year-end, against the current 2 percent level.

Correction: A previous version of this post said that GDP growth expectations have fallen for two consecutive weeks, instead of three. That information has been corrected.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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