Central Bank Headquarters in Brasília (Credit: REUTERS/Amanda Perobelli)
by Bernardo Caram
BRASILIA (Reuters) – The Central Bank has lowered its forecast for Brazilian economic growth in 2022 to 1.0%, against 2.1% in the previous estimate, according to the Quarterly Inflation Report (RTI) released on Thursday.
In the document, the BC adjusted the prospect of expansion for the Gross Domestic Product (GDP) to an increase of 4.4% this year, compared to an estimate of 4.7% calculated in September.
The Ministry of Economy, in turn, forecasts an expansion of 5.1% for the GDP this year and 2.1% for the next, while the market, according to the latest Focus bulletin, estimates that the economy will grow 4.65 % in 2021 and 0.50% next year.
“Negative surprises in recently released data –which suggest a loss of activity dynamism and reduce the statistical load for the following year–, new increases in inflation, partially associated with supply shocks, and an increase in fiscal risk worsen the forecasts for the evolution of the economic activity next year,” said the monetary authority.
Bacen once again stated that questions regarding the country’s fiscal framework translate into higher risk premiums, impacting current financial conditions and future economic activity.
Another factor that adds to the most unfavorable scenario, according to the BC, is the perspective that limitations in the availability of inputs in certain production chains last longer.
INFLATION
In the report, the monetary authority points out that the probability of inflation exceeding the upper limit of the tolerance margin for the target in 2022, of up to 5%, increased from around 17% in the forecast made in September to 41% in the current estimate.
“Consumer inflation remains persistent and high. The rise in prices was another surprise in the quarter ended in November. […] There is concern about the magnitude and persistence of shocks, their possible secondary effects and the rise in inflation expectations, even beyond calendar year 2022,” he said.
Regarding monetary policy, the BC reiterated a message in the minutes of the Monetary Policy Committee (Copom) about the intention to raise the Selic again by 1.50 point at the February meeting, continuing the high cycle to take the basic rate of interest to “significantly contractionary” territory to curb inflation. The base interest rate is at 9.25% per annum.
(Edited by José de Castro)
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