By Jeffrey T. Lewis
SÃO PAULO--The Brazilian government cut its economic growth
forecast for 2014, reflecting the sluggish expansion already seen
so far this year.
The country's gross domestic product will grow 1.8% in 2014,
compared with the 2.5% projected by the government earlier this
year, according to a report released Tuesday. The government also
raised its forecast for inflation for the year, to 6.2% from
5.6%.
The estimate for the central government's income excluding
transfers to states and municipalities was raised by 714.5 million
reais ($332.7 million), to 1.095 trillion reais, after the estimate
for transfers was cut.
The government's growth forecast is considered optimistic by
most economists, who expect an expansion of only about 1% in 2014.
Indicators released earlier this year have pointed to slowing
growth, and many economists are predicting that Brazil will suffer
a recession at some point in the year.
The news comes at a bad time for President Dilma Rousseff, who
faces re-election in October and has been losing ground against her
main challenger in recent opinion polls. With inflation above the
6.5% ceiling of the central bank's target range and growth slowing,
concerns that Brazil is entering a period of so-called stagflation
are intensifying.
The government left its forecast for the exchange rate at the
end of the year unchanged at 2.29 reais to the dollar.
Brazil's central bank has been auctioning currency exchange swap
contracts regularly for nearly a year to try to prevent the real
from weakening against the dollar and adding to inflationary
pressures. The central bank targets a 4.5% inflation rate, but it
tolerates a range of two percentage points in either direction.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com