(Reuters) – Economists at Bank of America Merrill Lynch and Societe Generale on Friday slashed their forecasts for Brazil’s economic growth this year, the latest of a series of revisions highlighting mounting pessimism about Latin America’s largest economy.
BofA economists David Beker and Ana Madeira expect Brazil to grow just 0.7 percent this year, down from a previous estimate of 1.6 percent, as low business and consumer confidence hampers government efforts to jumpstart the economy.
Societe Generale’s Dev Ashish trimmed his forecast to 1.1 percent from 1.7 percent, saying that weak industrial and trade data dashed hopes of a positive second quarter.
Both revisions were published in research reports on Friday.
The consensus view for Brazil’s 2014 growth in a Reuters poll on Thursday was at 1.1 percent.
BofA also trimmed its forecast for Brazil’s 2015 growth to 1.5 percent from 2 percent.
Brazil, once one of the most dynamic of emerging economies, could be in a recession already as factories start to cut jobs, according to some analysts.
But even as the economy falters, both BofA and Societe Generale reiterated that interest rates would probably go up next year as inflation remains high. Both teams expect the benchmark Selic rate to end 2015 at 12 percent, up from 11 percent currently.
Brazil’s sluggish economy could be decisive in the upcoming October presidential elections, in which President Dilma Rousseff will seek another four-year term. Support for her has slipped in the last two weeks, and she is statistically tied with her main challenger in a possible second-round runoff, a poll released on Thursday showed. (Reporting by Silvio Cascione; Editing by Lisa Von Ahn)