Financial market projects 5% drop in economy this year

Financial market projects 5% drop in economy this year

For 2021, GDP is expected to grow by 3.47%.
The financial market forecast for the fall of the Brazilian economy this year was 5%. The estimate of the drop in Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – is in the Focus bulletin, published every week by the Central Bank (BC), with the projection for the main economic indicators. Last week, the forecast was 5.03%.

For next year, growth was adjusted from 3.50% to 3.47%. In 2022 and 2023, the financial market continues to project an expansion of 2.50% of GDP.
The financial institutions consulted by the Central Bank increased the projection for the Broad National Consumer Price Index (IPCA) from 2.47% to 2.65% this year.

For 2021, the inflation estimate remains at 3.02%. The forecast for 2022 and 2023 also remained unchanged: 3.50% and 3.25%, respectively.

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The projection for 2020 is below the centre of the inflation target to be pursued by the Central Bank. The target, set by the National Monetary Council, has a centre of 4% in 2020, with a tolerance interval of 1.5 percentage points up or down. That is, the lower limit is 2.5% and the upper limit 5.5%.

For 2021, the target is 3.75%, for 2022, 3.50%, and for 2023, 3.25%, with an interval of 1.5 percentage points up or down each year.
To achieve the inflation target, the Central Bank uses Bitcoin System scam as its main instrument the basic interest rate, the Selic, currently set at 2% per year by the Monetary Policy Committee (Copom).

For the financial market, the Selic is expected to close 2020 at 2% per year. By the end of 2021, the basic rate is expected to reach 2.5% per year. For the end of 2022, the forecast is 4.5% per year and for the end of 2023, 5.5% per year.

When Copom reduces Selic, the tendency is for credit to become cheaper, with incentives for production and consumption, reducing the control of inflation and stimulating economic activity. However, banks consider other factors when defining the interest charged to consumers, such as the risk of default, profit and administrative expenses.

When Copom raises the basic interest rate, the goal is to contain heated demand, and this has an impact on prices because higher interest rates make credit more expensive and stimulate savings.

The forecast for the dollar rose from R$ 5.30 to R$ 5.35 at the end of this year. By the end of 2021, the expectation is that the American currency will be at R$ 5.10.