Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Economists turn bullish on Brazil 2017 growth as interest rates fall

Published 02/14/2017, 12:33 PM
Updated 02/14/2017, 12:40 PM
© Reuters.  Economists turn bullish on Brazil 2017 growth as interest rates fall

By Luiz Gerbelli

SAO PAULO (Reuters) - Several economists are turning bullish on a return to growth in the Brazilian economy following months of downward revisions to forecasts as slowing inflation fuels bets on aggressive interest rate cuts.

The upswing in confidence suggests Latin America's largest economy may finally be heading for a recovery from a brutal two-year recession after frustrated expectations of a rebound last year.

This week, economists at Credit Suisse (SIX:CSGN) Securities revised upwards their forecast for gross domestic product (GDP) growth in 2017 to 0.2 percent from zero.

This may be the first in an incoming series of upward revisions. Key forecasters, such as Banco Santander (MC:SAN) Brasil, say risks are skewed to the upside following a slew of move positive economic data, from improvements in confidence surveys to rising industrial output.

For economist Gustavo Arruda of BNP Paribas (PA:BNPP), the economy is likely to grow 1 percent this year, in line with government estimates.

"We still believe that the combination of stronger sentiment, lower rates and advancing reforms is likely to confirm that the recession has been left behind," he told Reuters.

For years, the Brazilian economy underperformed analyst expectations as it sank into its deepest recession on record.

Hopes that it could emerge from the downturn in the second half of last year proved misplaced amid political uncertainty and falling commodities prices.

The economic rout helped push inflation from a double-digit annual rate in 2015 to near the government's 4.5 percent target this year, allowing the central bank to embark on the first rate-cutting cycle in four years.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Traders and economists expect the benchmark Selic overnight lending rate, now at 13 percent, to end the year in single digits.

Economists say that could be the missing piece in the puzzle, lifting the economy out of the two-year recession just as President Michel Temer presses ahead with business-friendly reforms to pensions and labor rules.

Still, skeptics say it may be too soon to bet on a V-shaped recovery, citing a bout of mixed forward-looking economic indicators such as heavy-vehicle traffic and cardboard output.

"There is good news but it is not yet translating into higher growth," Banco Fator chief economist José Francisco Gonçalves said. "Lower rates are important, but not sufficient."

He added that he will likely improve his forecast of a 0.2 percent GDP contraction this year, but to a figure "closer to zero than to 1 percent."

The median estimate in a central bank poll of economists points to 0.48 percent growth this year, accelerating to 2.30 percent in 2018.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.