Brazil: economic activity decelerates further at the beginning of the year

GDP growth declined to +0.2% QoQ in 1Q14 from +0.4% QoQ in 4Q13 (and +0.5% QoQ on average in 2013) due to the more restrictive tone of economic policies, lower confidence / higher uncertainty and the impact of the deceleration of China and Argentina on exports. GDP figures released today, together with evidence of additional weakness of economic activity at the beginning of 2Q14, add a strong downward bias to our 2.0% GDP forecast for 2014. Moreover, they reinforce the view that the Central Bank will leave the SELIC rate unchanged at 11.0% for a while.

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