Brazil halves 2019 economic growth forecast to 0.8% from 1.6%

By Marcela Ayres and Jamie McGeever

BRASILIA (Reuters) – Brazil’s government slashed its economic growth forecast for this year to 0.8% from 1.6%, the Economy Ministry said on Friday, blaming continued weakness in the second quarter following the economy’s contraction in the first.

A challenging global outlook in the first half of the year weighed on trade and investment inflows, leading to investment projects being postponed, while uncertainty surrounding pension reform also put investment projects on ice and slowed growth, the ministry said.

The steep downward revision brings the government’s outlook in line with that of the central bank and private sector consensus. The government also reduced its 2020 growth forecast to 2.2% from 2.6%.

“Available monthly indicators from the second quarter of 2019 suggest the recovery remains slow,” the Economy Ministry said in its Macroeconomic Panorama report for July. “Business and consumer confidence has fallen since the start of the year due to the slow recovery,” it said.

For the average Brazilian, however, the economy may feel even tougher than the headline figures suggest. According to the government’s updated forecasts, gross domestic product growth per capita this year will be zero.

The new forecasts do not “completely” take into account approval of the government’s pension reform bill, which took a huge step forward this week after the lower house of Congress overwhelmingly voted in favor of the bill’s basic text.

Speaking at a news conference in Brasilia on Friday, special secretary to the Economy Ministry Waldery Rodrigues said pension reform could add 0.5 percentage point to annual GDP growth over a period of several years.

The social security system overhaul aims to shore up the country’s finances, save Brazil around 1 trillion reais ($267 billion) over the next decade, boost investment and kick-start growth.

The government also lowered its 2019 inflation forecast to 3.8% from 4.1%, again in line with market expectations.

($1 = 3.74 reais)

(Reporting by Marcela Ayres; Writing by Jamie McGeever; Editing by Chizu Nomiyama and Dan Grebler)

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