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BC projects higher growth in 2017 and 2018

Inflation Report

Document released by the institution raised the estimates for the Gross Domestic Product (GDP)

With the advance of the Gross Domestic Product (GDP) in the second quarter, at a level higher than expected, the Central Bank revised upward the projection of growth for the Brazilian economy to 2017 and 2018.

For this year, the institution raised the economy's estimate of advance from 0.5% to 0.7%. In 2018, the monetary authority forecasts an even higher growth of 2.2%.

The BC projections are included in  the Inflation Quarterly Report , a document that gathers all of the institution's assessments of the economy and how it should evolve.

"The positive revision mainly reflects the performance of GDP in the second quarter, higher than the median of market expectations. Sectoral results of more frequent indicators, recently released, have shown positive surprises, "explained the institution.

Commenting on the resumption of economic activity, the Central Bank emphasized the positive effect of the increase in household consumption, influenced by the withdrawal of the inactive accounts from the FGTS, one of the main factors driving the GDP of the second quarter.

"Emphasis should be placed on the significant expansion of household consumption, after nine negative quarterly variations ... in an environment of significant disinflationary process and the reaction of credit to households, reflecting the effect of the cuts in the basic interest rate and the advanced stage of the process of deleveraging (reduction of indebtedness) of families, "reinforced the Central Bank.

Economic reforms

Faced with the revision of the primary deficit target (expenses greater than revenues) of R $ 159 billion for this year, the institution affirms that the reduction of the gap and the balance of public accounts are conditioned to the approval of the economic reforms.

"Fiscal consolidation is conditional on the progress of the reform process and other necessary adjustments, which will be fundamental for reversing the upward trajectory of the public debt and reducing the structural interest rate", defends the Central Bank.

In addition, the paper said, the board of directors of the institution stressed that the process of economic reforms is important to keep the process of falling inflation and interest rates. 

"The Committee emphasizes that the reform process, such as the recent approval of measures in the credit area, and the necessary adjustments in the Brazilian economy contributes to the fall in its structural interest rate," says the Central Bank.

Source: Portal Brasil, with information from  the Central Bank