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Market Reduces Forecast of Brazilian Economy for the 9th Time



The 2020 estimate was maintained at 2.50% after five consecutive reductions, while GDP growth expectations remain the same

Financial institutions reduced for the ninth time following the projection for the growth of the Brazilian economy this year. The estimate for GDP (Gross Domestic Product) expansion – the sum of all goods and services produced in the country – has now dropped from 1.71% to 1.70% this year. Four weeks ago, the estimate was at 1.98%.

For 2020, the projection was maintained at 2.50% after five consecutive reductions. Estimates of GDP growth for 2021 and 2022 remain at 2.50%.

The figures are in the Focus bulletin, a weekly publication based on studies of financial institutions on key economic indicators. The bulletin is released on Mondays by the BC (Central Bank) in Brasilia.


The inflation estimate, calculated by the IPCA (National Broad Consumer Price Index) , was maintained at 4.01% this year. The forecast for 2020 is 4%. For 2021 and 2022, there was also no change: 3.75%.

This year’s inflation target, defined by the National Monetary Council (CMN), is 4.25%, with a tolerance interval of 2.75% and 5.75%.

The estimate for 2020 is at the center of the target: 4%. This goal has a range of 1.5 percentage points up or down.

For 2021, the target center is 3.75%, also with a tolerance interval of 1.5 percentage points. The CMN has not yet set the inflation target for 2022.

Selic Rate

To control inflation, the Central Bank uses the Selic (Special Settlement and Custody System) as its main instrument. For the financial market, the Selic should remain at its historical low of 6.5% per year until the end of 2019.

By the end of 2020, the projection continues at 7.50% per year. By the end of 2020 and 2021, the expectation remains at 8% per year.

Selic, which serves as a reference for other interest rates in the economy, is the average rate charged in negotiations with securities issued by the National Treasury, registered daily in the Selic.

The maintenance of the Selic this year, as the financial market predicts, indicates that the Copom (Monetary Policy Committee) considers previous changes in basic interest rates sufficient to reach the inflation target.

By reducing basic interest rates, the tendency is to reduce credit costs and encourage production and consumption.

To cut the Selic, the monetary authority needs to be sure that prices are under control and are not at risk of getting above the inflation target.

When the Copom increases the Selic, the goal is to contain the heated demand, and this causes price spillovers because higher interest rates increase credit and stimulate savings.

US Dollar

The financial market forecast for the US dollar exchange rate is R $3.75 at the end of 2019 and was adjusted from R $3.80 to R $3.79 at the end of 2020.