By Ben Tavener
SAO PAULO
Brazil's economy will shrink by 0.58 percent in 2015, according to a central bank survey released Monday.
The latest result, calculated by the weekly Focus survey of more than 100 financial institutions, was the ninth consecutive downward revision by economists. If confirmed, it would be the worst annual contraction in 25 years.
The economy saw negative growth of 4.35 percent in 1990, but the most recent contraction seen was in 2009, when negative 0.33 percent GDP was recorded.
Analysts still believe the economy will grow by 1.5 percent in 2016, but predict official figures for 2014, due to be released March 27 by the government's statistics agency, IBGE, will show growth flatlined last year.
The forecasts also raise the specter of Brazil re-entering recession -- technically characterized by two consecutive quarters of negative growth. Brazil experienced recession during the first half of 2014.
The survey also showed that economists believed inflation, as measured by the IPCA –broad consumer price index – would rise more quickly than previously predicted, to an annual rate of 7.47 percent this year, far above the government's central target of 4.5 percent. If confirmed, the rate would be the fastest since 2004, when it topped 7.6 percent.
In a bid to counter higher inflation, economists also predict the benchmark SELIC interest rate will rise to 13 percent by year's end, up from a previous prediction of 12.75 percent.
The economic pessimism in the latest survey saw São Paulo's Ibovespa index fall just short of 1 percent at 1:30 p.m. (GMT1630) to 51,069 points. The Brazilian real, also weakened by 1.35 percent against the US dollar, was trading at 2.88 reais at the same time.
The news comes at a time when Brazil is actively seeking to boost external confidence in its fiscal policies. Finance Minister Joaquim Levy has shown he is keen to kickstart the country's sagging economy, including through tax hikes and government spending cuts, even if the measures result in a negative balance in the short term.
