More Signs of the Size of the Recession

BRAZIL ECONOMICS - Report 25 May 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

In announcing last week the spending cuts necessary for the fiscal adjustment, the government revealed that its revenue projections are based on a GDP contraction of 1.2% in 2015. This is the "consensus forecast" of the most recent Focus survey published by the Central Bank. But a comparison between the projection in the Focus survey at the start of the year and that actually observed shows a wide gap. That margin for error requires extreme caution regarding the reliability of the latest projection. The latest indicators of the conditions under which the Brazilian economy has been operating signal the GDP contraction this year will be substantially greater. Our projection is for GDP to drop by 1.7% in 2015.

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