Economists see GDP growing less in 2014.

By Camila Moreira

SAO PAULO (Reuters) - In light of new weak data on the Brazilian economy, economists from financial institutions have reduced their outlook for GDP growth this year once again, while their projection for the benchmark interest rate in 2015 has also declined.

The Central Bank's Focus survey released on Monday showed that expectations for economic growth this year have been reduced for the 12th consecutive week, to just 0,79 percent, compared to 0,81 percent in the previous survey. In 2013, GDP grew by 2,5 percent.

The figure comes alongside the prospect of an even stronger contraction for the industry in 2014, of 1,76 percent, compared to 1,53 percent previously.

The median forecast for GDP growth in 2015 remained at 1,20 percent, according to the Focus report.

Especially in the second quarter, activity data in Brazil came in poor, fueling expectations that the country had entered a technical recession -- when there is contraction for two consecutive quarters.

Last quarter, retail sales and industrial production fell 0,6 and 2 percent, respectively, compared to the first quarter.

SELIC

The Focus report also showed a reduction in the outlook for the benchmark interest rate next year, now projected at 11,75 percent, compared to 12,00 percent the previous week.

Economists maintained their projection that the Selic rate will end 2014 at the current 11 percent, and foresee the new monetary tightening cycle beginning in March, with an increase of 0,50 percentage points, the same as in the previous survey.

The Top 5 medium-term forecasters, comprising the institutions with the most accurate projections, continue to see the Selic rate at 11 percent this year and at 12 percent by the end of 2015.

The rise in interest rates comes along with a scenario of high inflation. The agents consulted in the Focus survey slightly reduced their projection for the IPCA (Brazilian consumer price index) increase in 2014 to 6,25 percent, from 6,26 percent. This is the same level expected for next year, without changes, showing that there is no expectation of a cooling of prices.

The Focus report also showed that economists see administered prices rising by 5,05 percent this year, slightly below the 5,10 percent previously expected. For 2015, the forecast remained at 7 percent growth.

After the IPCA (Brazilian consumer price index) remained at the upper limit of the target range for the 12 months ending in June, attention now turns to the August IPCA-15 figures that IBGE (Brazilian Institute of Geography and Statistics) will release on Wednesday. The government's target is 4,5 percent, with a margin of 2 percentage points above or below.

For the next 12 months, there was an upward adjustment of 0,02 percentage points in the IPCA increase, to 6,21 percent.

The Top-5 medium-term forecasters see inflation at 6,32 percent in 2014, down from 6,33 percent, and closing 2015 at 6,48 percent, unchanged from the previous survey.

(Edited by Patrícia Duarte)