Brazilian Analysts Predict 7 Percent Inflation for 2016 As Country Heads For Further Economic Contraction

By Staff Reporter| Jan 19, 2016

Brazil's Central Bank has announced that an analysis by a number of economists has predicted that the Latin American country is on its way to even more inflation this year, according to the figures of the Boletin Focus, a weekly analysis by economists from private financial institutions across the country, reports FOX News Latino.

The analysts have stated that the country's gross domestic product (GDP) is set to drop 2.99 percent during the year. The country's official consumer-price index, the IPCA, is also expected to go reach 7 percent, up from economists' expectations of a 6.93 percent rise reported a week ago.

The analysts' estimates lie far beyond that of the Central Bank's own prediction, which perceived the country's inflation rate to normalize at about 4.5 percent for this year. The Wall Street Journal further states that the Central Bank's previous estimates even included a tolerance band of between 2.5 percent and 6.5 percent.

With the current state of the Latin American country's economy, Brazil might very well be on its way to its second year of economic contraction, with the analysts from Boletin study emphasizing that in 2015, the country's economy weakened at its fastest pace in 25 years, contracting 3.71 percent.

As for the present year, analysts perceive the contraction to be about 2.99 percent, a significantly smaller number from last year's figures, but a significant number nonetheless.

According to a report by Bloomberg Business, Brazil's Finance Minister Nelson Barbosa has stated that the government is currently expecting inflation to slow down this year, with the IPCA hitting 10.67 percent last year, the highest levels it has achieved in 12 years as the country faces its deepest recession in decades.

With the recent report stating that inflation is above target in 2016, Brazil's Central Bank might initiate a number of rate increases that might have the side effect of deepening the recession.

For one, policymakers across the country are allegedly set to increase the benchmark interest rate to 14.75 percent from an initial 14.25 percent intended increase.

Brazil has been in a technical recession with its GDP contracting for three consecutive quarters, resulting in the country's sovereign debt being lowered to junk status by Standard and Poor's and Fitch Ratings, despite the country's foreign currency reserves reaching far beyond its international liabilities.

Much of Brazil's economic woes have been attributed to the a number of spending cuts by President Dilma Rousseff's administration, which are aimed at reducing the budget deficit of the country.

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