Economy

Brazil's market lowered expectations for both the basic interest rate and the economy in 2021

The basic interest rate "Selic" closed 2020 at the historic low of 2% and Focus survey points to maintaining this value at the first meeting of this year, on 19 and 20 January

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  • This year, the basic Selic rate is projected to end at 3%;
  • The consulted economists started to see a contraction of 4.36% of the Gross Domestic Product (GDP) in 2020.

The market lowered expectations for both the basic interest rate and the performance of the economy in 2021, according to the Focus survey released by the Brazilian Central Bank on Monday.

This year, the basic Selic rate is projected to end at 3%, against 3.13% in the median of the previous week’s projections, going to 4.50% at the end of 2022.

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The rate closed 2020 at the historic low of 2% and Focus points to maintaining this value at the first meeting of this year, on January 19 and 20.

For the Top-5, the group that most correctly forecasts, the Selic should also close this year at 3% and go to 4% next year, without changes;

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The weekly survey also pointed out that the economists consulted started to see a contraction of 4.36% of the Gross Domestic Product (GDP) in 2020, down 4.4% before. For 2021, GDP growth was estimated at 3.4%, 0.09 percentage points less than in the previous week. For 2022 the expectation is for growth of 2.5%.

For inflation, the survey shows an estimate of 4.38% in 2020, from 4.39% before. For this year, the account is for a consumer price index increase of 3.32% from 3.34% before, with an increase of 3.50% in 2022.

The center of the official 2020 target is 4%, for 2021 it is 3.75% and for 2022 it is 3.50%, always with a margin of tolerance of 1.5 percentage points more or less.

(Translated by LABS)

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