Halister News

(Bloomberg) -- Bank revises projection for IPCA inflation index in 2017 to 3.8% from 4.2%, and for 2018 to 4.8% from 5.0%, according to report signed by analysts led by Nilson Teixeira.

• 2017 inflation revision “results mainly from the more favorable inflation dynamics in the short term than previously expected, especially for administered prices”, says the report citing gasoline prices as an example
• 2018 forecast change due “mainly to the revision of the dynamics of inflation for the next few months”
  • Credit Suisse projects IPCA in May at 3.8% y/y and at 2.9% y/y in August, “the lowest figure for the year”
    • “Although we project a rise in inflation in the last months of the year, we now expect such increase to be less significant than previously anticipated”
  • Rise in inflation next year will be prompted mainly by a scenario of sharp BRL depreciation and higher food inflation, with dissipation of the favorable supply shock of this year
  • Wide output gap will contribute to reduce inflation in the items most sensitive to domestic demand, although at a lesser magnitude than in 2016 and 2017
• In a separate report, Credit Suisse’s analysts rise forecasts for Brazil’s exports to $202b in 2017 from $185b in 2016, and for imports to $150b in 2017 from $138b in 2016, resulting in a trade surplus of $52b this year, higher than the last forecast of $45b
• Analysts see a “slight rise in the current-account deficit, from 1.3% of GDP in 2016 to 1.4% of GDP in 2017”, saying the “outlook for external accounts remains benign for 2017”
  • “The rise in the deficit of services and income in the first four months of the year was in line with our projections”
  • “The increase was explained mainly by the improvement in domestic demand and by the lag effect of the BRL appreciation in real terms”

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Danielle Chaves