Brazil's 2015 GDP likely to be -2.9%

There is an upward revision in Brazil's inflation expectations due to the squeeze in fiscal accounts, with a public deficit projected in 2015, and a surplus of just 0.7% of GDP in 2016.

Market participants have been acknowledging the undesired consequences of a too-loose-for-too-long fiscal stance on the country's accounts.

"We recently downgraded our GDP growth forecasts to 2015 (-2.9%) and 2016 (-1.4%), although it is fair to say that even these are starting to look optimistic. The political landscape remains far from supportive of fiscal adjustment and reforms of public sector and government", says Barclays in a research note. 

Nevertheless, the case that the chance of impeachment, which is low, has dropped further and the issues facing Lower House President Eduardo Cunha provide the government with a little more space in the immediate term. 

That said, political stagnation is the main scenario and this is only serving to degrade confidence and worsen the fiscal backdrop further.