Stênio Ribeiro
Reporter - Agência Brasil

Brasília - The government's annualized benchmark interest rate (Selic), which currently stands at 19%, is expected to be lowered to 18.50% at the meeting of the Monetary Policy Committee (Copom), tomorrow (22) and Wednesday (23). An identical reduction is expected at December's meeting, reducing the year-end interest rate level to 18%, according to the estimate reported in the Focus Bulletin, published today (21) by the Central Bank (BC).

The Focus Bulletin, which is based on a survey conducted by the BC every Friday with a hundred market analysts and financial institutions to "detect tendencies" in the major economic indicators, also conveys greater optimism when it comes to the downward trend in interest rates for 2006: The forecast for year-end 2006 is now down to 15.50%, after falling from 15.88% last month to 15.75% last week.

This optimism, however, does not carry over into the growth of the economy. News of stagnating industrial production in the third quarter of the year led the respondents to reevaluate the growth prospects of the Gross Domestic Product (GDP) - the total of all wealth produced in the country. Their previous forecast of 3.20% now stands at 3.09%, and their growth estimate for industrial production went down from 3.79% to 3.69%.

Their more modest outlook for the GDP, however, did not change their forecast for the year-end ratio between net government debt and the GDP, which remains at 51.60%. This is the same as saying that the debt corresponds to slightly more than half of all that is produced. This situation is expected to improve somewhat next year, when the analysts expect the ratio to be 50,70%, a notch better than last week's prediction of 50.80%.

The estimate presented in the BC survey for this year's trade surplus (exports minus imports) was raised from US$ 42.02 billion to US$ 42.40 billion, and the forecast for next year's surplus went up as well, from US$ 35 billion to US$ 35.20 billion. Expectations remained unchanged, however, for the current account surplus (US$ 13 billion), which involves all the country's foreign commercial and financial transactions, and the inflow of foreign direct investments to the productive sector (US$ 16 billion).

Translation: David Silberstein