BRASÍLIA – The National Confederation of Industry (CNI) projects a 3.9% drop in industrial Gross Domestic Product (GDP) this year. The previous forecast was up 2.8%. In view of the uncertainties with the crisis caused by the new coronavirus pandemic, the confederation outlined three scenarios. In the most pessimistic forecast, the drop in industry production will be 7%. Most likely, the estimate is 3.9% and, more optimistically, 1.8%.
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The projection for the country’s economic activity is now down 4.2% in 2020, reaching 7.3% in the worst case scenario.
The entity reviewed its last projection, released at the end of last year, which was a 2.5% growth in GDP this year. Now, in the most likely of the three scenarios outlined, the decline is 4.2%; in the pessimist, the economy shrinks 7.3%; and optimistically, GDP falls 0.9% in 2020.
“The degree of success of the economic measures, to reduce the impacts of the crisis caused by the coronavirus and the extension of the quarantine will be decisive for the performance of this year’s Gross Domestic Product (GDP)”, affirms CNI in its Conjunctural Report, released this Monday , 11.
The assessment is that the 4.2% drop will occur if economic aid policies are sufficient to prevent the closing of companies and the drop in income. In this scenario, social isolation would begin to be eased in May.
CNI also predicts a fall in inflation and a further reduction in the basic interest rate. The IPCA is expected to close the year at 1.97%, in the so-called base scenario, considered the most likely. In the pessimistic scenario, the indicator closes the year at 0.80% and, in the optimistic, 2.90%. At the end of last year, the entity projected 3.70% inflation in 2020.
As a result, the confederation expects to see a further reduction in the Selic rate, reaching 2.50% at the end of the year in both the base and optimistic scenarios. In the worst case, that number could reach 2.25%. At the end of last year, the Selic expectation was 4.5% in 2020.
There was also a worsening in the forecast for the unemployment rate, which went from an estimate of 11.3% to 12.5%, reaching 13.5% in the worst scenario. For the exchange rate, the entity’s projection for the year average went from R $ 4.05 to R $ 4.68.
The pandemic is expected to result in a $ 25 billion drop in Brazilian exports in 2020, according to the CNI. According to the organization, Brazil will sell US $ 205 billion abroad, compared to the US $ 230 billion expectation made at the end of 2019.
The estimate for the trade balance went from US $ 38 billion to US $ 36 billion. The projection is that imports will reach US $ 169 billion, against US $ 192 billion previously projected.
The confederation also projects a significant worsening of the Brazilian primary deficit. The projection went from -1.3% to -9.47%. The expectation for the nominal result was a deficit of 6.40% to a gap of 15%. As a result, the forecast for the gross public debt / GDP ratio increased from 79.3% to 93.2%.
The entity assesses that the government needs to maintain the search for debt reduction and fiscal balance to increase confidence in the country and attract investments. “In order to get out of the crisis in a sustained manner, the country needs, more than ever, to eliminate the Brazil cost, with a tax reform that creates a more efficient and less complicated system”, stated the president of CNI, Robson Braga de Andrade.
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