Brazil growth forecasts tumble as key pension reform vote looms

By Jamie McGeever and Marcela Ayres BRASILIA (Reuters) - Economists continue to slash their forecasts for Brazilian economic growth this year, according to a closely watched survey published on Monday, intensifying the spotlight on a key Congressional vote on pension reform later in the week.

Reuters April 23, 2019 02:05:31 IST
Brazil growth forecasts tumble as key pension reform vote looms

Brazil growth forecasts tumble as key pension reform vote looms

By Jamie McGeever and Marcela Ayres

BRASILIA (Reuters) - Economists continue to slash their forecasts for Brazilian economic growth this year, according to a closely watched survey published on Monday, intensifying the spotlight on a key Congressional vote on pension reform later in the week.

The central bank's weekly FOCUS survey of nearly 100 financial institutions showed the median forecast for 2019 growth fell sharply in the latest week to 1.71 percent from 1.95 percent a week before.

The survey was released a day before the Congressional Constitutional and Legal Affairs Committee (CCJ) is scheduled to vote on the constitutionality of the government's signature social security reform bill.

The vote was supposed to take place last week but was delayed after lawmakers, including government allies, demanded more time to discuss some of the bill's more controversial elements.

Labour and Pensions Secretary Rogerio Marinho said on Monday there will be some "minor changes" to the bill but insisted they will not dilute the bill's targeted savings of 1.1 trillion reais ($280 billion) over the next decade, although he did not give any details on where the changes might be made.

Analysts say pension reform is critical to restoring public finances to health, unleashing huge investment into Brazil and reviving the economy. The latest FOCUS survey highlighted just how critical it is.

A drop of almost one quarter of a percentage point in the space of a week is big, and mirrors the 0.27 percentage point fall to 2.01 percent on March 18 from 2.28 percent, just as political infighting on social security reform began to heat up.

At the start of 2019, the median FOCUS forecast for GDP growth this year was 2.55 percent.

"It's really disappointing, and strengthens the view that interest rates will eventually be cut," said Cleber Aliesse, a derivatives broker at brokerage H.Commcor in Sao Paulo. "The only thing supporting the rates curve and (official) interest rates is uncertainty over fiscal reforms."

With the growth outlook darkening by the week, the need for meaningful fiscal reform is growing.

Economists at research consultancy TS Lombard on Monday said sub-par indicators released so far this year suggest the economy may even have contracted in the first quarter, with uncertainty over reforms putting company investment plans on hold.

"In recent months, the lack of progress on structural reforms has eroded confidence for consumers, industry, retail and services," Wilson Ferrarezi, the firm's Brazil economist, wrote a note to clients.

($1 = 3.93 reais)

(Reporting by Jamie McGeever and Marcela Ayres; editing by Chizu Nomiyama and Susan Thomas)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.