Weekly Report - 06 August 2009 (WR-09-31)

BRAZIL | GDP forecast. The planning-ministry-linked Instituto de Pesquisa Econômica Aplicada (Ipea) lowered its GDP forecast for 2009 to between 0.2%-1.2%, from a previous estimate of 2%. The Ipea cited the “negative effect" of a poorer-than-expected economic performance in the first quarter. Figures from the official statistics agency, the Ibge, showed that Brazil's industrial activity fell by 13.4% in the first half compared with the same period a year earlier.
Meanwhile, the central bank monetary committee (Copom) signaled it would be “more cautious" with interest rates after cutting the base rate, the Selic, by half a percentage point to 8.75% last week. This was the Selic's lowest level: the bank has slashed it by five points since January. The cuts led to an increase in credit in Brazil, which the government expects will bolster economic activity. The increase in credit, however, has also led to an increase in inflation expectations, although all market projections remain below the central bank's 4.5% target for 2009.