Stênio Ribeiro
Reporter - Agência Brasil

Brasília – The Central Bank's weekly market survey, the Focus Bulletin, has found that market analysts and financial instutions believe in a further devaluation of the dollar against the real - Brazil's currency. Last week the market forecast was for the dollar to close out 2006 at R$2.35. This week it fell to R$2.30. The forecast for 2007 also dropped: down from R$2.50 to R$2.40.

The principal reason for the dollar devaluation is the surge in Brazil's foreign trade surplus. Last year it reached US$44.7 billion. And market forecasts are for it to close at around US$40 billion again in 2006.

At the same time, the market forecast for the 2006 current account surplus rose from US$8 billion to US$9 billion. And for 2007, the forecast for the current account surplus rose from US$4.25 billion to US$5.25 billion.

Market forecasts for domestic economic performance are less upbeat. GDP growth for 2006 is expected to close out the year at 3.50%, with a sluggish 4% increase in industrial sector output. The forecast for 2007 is a GDP increase of 4.13%, down from last week's forecast of 4.25%.

Forecasts for the 2006 net debt/GDP ratio went from 50.45% to 50.50%. And for the 2007 net debt/GDP ratio it went from 48.70% to 48.90%.

With regard to interest rates, the forecast for the benchmark Selic is for it to close out 2006 at 15%, and drop to 13% by the end of 2007.

Translation: Allen Bennett