Losing Hope about Growth

BRAZIL ECONOMICS - Report 16 Jun 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

Since taking office, the current government has been consistently promising a return to vigorous growth, but these promises have never been realized. At the start of the Rousseff administration, the promise was for growth of at least 4%, and this was the consensus projection of the market as reflected in the Central Bank’s Focus survey. However, in 2011 and all ensuing years, everyone has been surprised by much lower growth than was projected at the beginning of the year. Graph 1 shows the month-by-month paths of the projections from 2011 until June 2014. In all years, the projections progressively declined as time wore on. Currently, the median of the distribution of GDP growth projections is about 1.5%, but the most recent indicators suggest this outlook is overoptimistic. We believe it is unlikely that growth in 2014 will exceed 1%.

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