Brazilian economy likely to expand 0.5 pct in 2017, inflation to decelerate to 4 pct-4.5 pct

The Brazilian economy is indicating signs of a steady rebound. Indicators for confidence are rebounding on par with strong price stabilization. The Brazilian government is advancing structural reforms that are speeding up foreign investment inflows. According to a Scotiabank research report, Brazil’s real GDP growth is expected to accelerate 0.5 percent in 2017 after contracting 3.6 percent last year. And it is likely to expand to 2.5 percent in 2018.

A large-scale infrastructure investment programme has been set aside by the public sector as a major economic activity driver for the remainder of the decade. Meanwhile, the industrial output growth is likely to come in the positive territory in 2017-2018, stated Scotiabank. The Brazilian central bank has adopted an ultra-stimulating monetary policy, which is expected to help domestic consumption.

Meanwhile, the disinflation process in the nation is successfully advancing. Inflation had peaked 10.7 percent year-on-year in January 2016. However, in March 2017, the consumer price inflation decelerated to 4.6 percent year-on-year.

“Looking ahead, a marked improvement in inflationary expectations will lead monetary authorities to execute more aggressive stimulus to guide the inflation-adjusted policy rate to the 5% mark”, added Scotiabank.

Brazilian inflation is expected to range between 4 percent and 4.5 percent in 2017-2018, according to a recent central bank survey. During its April meeting, the central bank monetary policy committee had opted to cut its SELIC rate by 100 basis points to 11.25 percent. Market participants anticipate the policy rate to be aggressively cut further to close to 9 percent by the end of this year.