Brazil's contraction forecast to extend to 2016

Analysts surveyed by Brazil's central bank estimate that the economic recovery will take longer than previously thought, and that GDP contraction could continue into 2016.

Brazil's GDP is now estimated to contract 2.01% in 2015, compared with a 1.97% contraction in last week's survey and -1.70% a month before.

Up until two weeks ago, analysts predicted that GDP would start to recover by 2016. In the latest survey, GDP is seen as contracting 0.15% in 2016.

The yearly outlook for the IPCA – extended national consumer price index calculated by statistics agency IBGE – did not change from last week and remains at 9.32%, compared with 9.15% a month earlier. Inflation expectations for 2016 were revised slightly upwards to 5.44% from 5.43% a week ago and 5.40% a month before.

With inflation within the central bank's 2.5-6.5% target range, and in order to counteract the economy's slowdown, analysts predict the benchmark Selic rate to be cut to 11.88% next year from the current 14.25%.

The trade surplus projection for 2016 was upwardly revised to US$15.2bn from US$15.0bn last week. This year the trade surplus is expected to reach US$8.0bn.