Due to the effects of the coronavirus, the federal government again reduces the GDP estimate. Inflation forecast retreated to 3.05%
The Ministry of Economy discloses, through the budget expenditure report, the new forecast for the growth of the Gross Domestic Product (GDP) for this year. After a new review by the federal government, the estimate that was 2.1% for the year 2020, dropped to 0.02%.
GDP is the sum of all goods and services produced in the country and serves to measure the evolution of the economy
This new revision of the GDP estimate was due to the effects caused by the coronavirus pandemic in the world, which is aggressively affecting the activities of the economy.
According to a survey conducted by the Central Bank, last week the market estimated an increase of 1.68% for GDP in 2020. But there are already financial institutions estimating a contraction in GDP. This means that a new economic slowdown will take place.
In 2019, according to data from the Brazilian Institute of Geography and Statistics (IBGE), GDP grew by 1.1%. Weakest performance in the last three years. Growth was mainly affected by the slowdown in household consumption and private investment. In 2017 and 2018 growth in both years of 1.3%.
Inflation
According to a forecast made by the Secretariat for Economic Policy, the estimate for the Extended National Consumer Price Index (IPCA), which is the official inflation indicator, increased from 3.12% to 3.05% this year. Last week, the financial market predicted an IPCA of 3.10% for 2020.
Market inflation expectations for 2020 remain below the central target of 41TP3Q. The target system tolerance range ranges from 2.5% to 5.5%.
This inflation target is determined by the National Monetary Council (CMN). And to reach it, the Central Bank raises or lowers the Selic, the economy's basic interest rate.
The Extended National Consumer Price Index (IPCA), last year, considered Brazil's official inflation, closed at 4.31%, above the center of the target for the year, which was 4.25%. That was the highest annual inflation since 2016.
