The market predicts a 1% drop in GDP in 2015.

Financial market analysts predict a sharper contraction in economic activity this year than previously anticipated, from a 0,78% drop to a 1% decline; the forecast for the benchmark interest rate, the Selic, has also been raised from 13%, which had remained stable for weeks, to 13,25% per year by the end of 2015.

March 30, 2015, 12:38 PMUpdated July 05, 2018, 14:52 pm

Financial market analysts predict a stronger contraction in economic activity than previously anticipated for this year, from a 0,78% drop to a 1% decline; the forecast for the basic interest rate of the economy, the Selic, was also raised, from 13%, which had been held for weeks, to 13,25% per year at the end of 2015 (Photo: Gisele Federicce)

Mariana Branco - Reporter for Agência Brasil

Financial market analysts have increased their forecast for the end of the Selic rate, the basic interest rate of the economy, this year. From the projection of 13% that had been held for weeks, the estimate has risen to 13,25% per year at the end of 2015.

A stronger contraction in economic activity than previously anticipated is also expected. Investors have reduced their projection for Gross Domestic Product (GDP, the sum of goods and services produced in a country) from a 0,78% drop to a 1% decline.

The forecasts are in the Focus bulletin, a survey of financial institutions published weekly by the Central Bank (BC). The change in expectations for the Selic rate means that the market expects the BC's Monetary Policy Committee (Copom) to raise the rate by another 0,5 percentage point this year. This year, Copom has already increased the Selic rate by 1 percentage point, with two increases of 0,5 percentage points in the January and March meetings. The committee meets again on April 28 and 29.

The bulletin maintained its projection for inflation as measured by the Broad Consumer Price Index (IPCA). The forecast rose from 8,12% to 8,13%. The expectation for increases in administered prices, regulated by the government or by contract, rose from 12,6% to 13%. The rise in administered prices – such as energy and gasoline – accounts for a large part of inflation. The exchange rate estimate increased from R$ 3,15 to R$ 3,20.

The estimate for net public sector debt remained at 38% of GDP. The estimate for the current account deficit, which measures the quality of external accounts, fell to US$77,1 billion, lower than the previous US$79,8 billion. The projected trade balance surplus increased from US$3,5 billion to US$4 billion. Estimated foreign investment decreased from US$56,5 billion to US$56 billion.