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Projections for GDP and Industry Fall Again and Selic Have Prevision at 7.25% in 2020

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Expectations for the economy and industrial production this year fell again in Focus research released by the Central Bank on Monday after the BC reported a “significant likelihood” of a downturn in the first quarter.

Given this scenario, the survey also showed that the market started to see the monetary policy still looser next year.

For the Gross Domestic Product (GDP), the Focus growth estimate for 2019 went to 1.24%, from 1.45% last week, in the 12th week followed by reduction, with industry accounts falling the 0.23% percentage point, to 1.47%.

For 2020 the scenario for GDP and for industrial production did not change, respectively, of 2.50% and 3.00%, respectively.

Last week, the slowness of the Brazilian economy was twice approached by the BC. In the minutes of the meeting in which it kept the basic interest rate at 6.5%, the monetary authority cited the risk that the GDP has retreated slightly in the first quarter of this year over the previous three months.

Days later, BC President Roberto Campos Neto expressed disappointment about the economy’s recent performance but pointed out that the bank can not switch inflation controlled by economic growth.

The GDP figures for the beginning of 2019 will be announced by the IBGE on May 30. In the fourth quarter of last year, GDP grew 0.1 percent over the third and ended 2018 with an expansion of 1.1 percent, according to IBGE data.

The weekly survey of a hundred economists also showed that for the Selic interest rate, economists still see it at the current level of 6.5% by the end of this year. But by 2020 the account fell to 7.25%, from 7.5%.

Top-5, the group with the best forecasts, also sees the Selic at 6.5% in 2019, but calculates the even lower rate next year at 7.0%, from 7.21% in the median of projections last week.

The weekly survey showed that the expectation for the rise in the IPCA rose to 4.07% in 2019 from 4.04% before, remaining at 4.00% for the next year. The center of the official 2019 target is 4.25 percent, and 2020, 4 percent, both with a margin of tolerance of 1.5 percentage points to more or less.