Coronavirus Leads to Drop in GDP Projections

Industry slowdown also weighs on estimates; market reinforces expectations of new interest rate cut

São Paulo

The coronavirus epidemic in China and its effects on global finances will likely harm Brazil's economic activity in the first quarter of this year. Thus, analysts are revising downward projections of the Gross Domestic Product.

The industry is also expected to perform poorly. After growing 2.5% and 1% in 2017 and 2018, production fell 1.1% in 2019, the IBGE reported yesterday. Of the 26 sectors surveyed, 16 declined, especially mining (-9.7%), which was impacted by the tragedy in Brumadinho (MG).

Market reinforces expectations of new interest rate cut ( Foto: Adriana Toffetti / A7 Press / Folhapress).

Central Bank president Roberto Campos Neto said in two events last month that some market forecasts were not contemplating an expected slowdown in the industry and a lesser effect of FGTS withdrawals on consumption.

The Chinese outbreak and bad indicators reinforce the perception that the Central Bank should promote a further cut in the basic interest rate at today's Copom meeting. The central bank will likely reduce the interest rate from 4.5% to 4.25% per year.

 Translated by Kiratiana Freelon

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