Brazil's central bank trims 2021 GDP growth forecast to 3.6pc, cites pandemic

BRASILIA: Brazil's central bank trimmed its economic growth outlook for this year to 3.6% from 3.8%, according to its latest quarterly inflation report on Thursday, citing "above-usual uncertainty" over a recovery amid the COVID-19 pandemic.

The central bank also said it expects a $2 billion current account surplus this year, the first surplus in 14 years, and repeated the view of its rate-setting committee that various measures of underlying inflation are above the range compatible with meeting its inflation goals.

The central bank highlighted the threat to growth posed by the pandemic that has brought the public health system to its knees, triggered new lockdown measures across the country and turned Brazil into the global epicenter of the virus.

"The recent worsening of the health crisis will perhaps interrupt or delay the recovery of economic activity," the central bank said.

The central bank's 3.6% growth forecast for this year is still higher than the government's official 3.2% projection.

It remained confident, however, that the mass vaccination program will accelerate throughout March and April, thereby reducing pressure on the health system and allowing a faster reopening of the economy as the virus' spread is curbed.

The economic benefits of this will be felt more in the second half of the year, the central bank said, "especially in face-to-face services, which have been affected more by the pandemic."

The central bank stressed that a continuation of the government's reform agenda to deregulate the economy and get the public finances on a more stable footing was also essential to the recovery and sustainable growth.

The central bank raised its 2021 trade surplus forecast to $70 billion from $53 billion in its previous quarterly inflation report, and revised its 2021 current account outlook to a $2 billion surplus from a $19 billion deficit.

That would be Brazil's first current account surplus in 14 years, suggesting its balance of payments position with the rest of the world is in pretty good shape and not a factor behind the real's persistently weak exchange rate.