The country is suffering from its worst drought in four decades, which has reduced generation from hydroelectric dams that provide 80% of the country’s electricity source.
Banco Fibra SA downwardly revised its forecast for Brazil’s economy to grow 0.8% from 1.5% after the GDP report, the slowest pace since the economy contracted in 2009. Economists esimate that the economy will average a 1.8% expansion in 2014, down from a 2.5% outlook last year. Analysts expect inflation to continue creeping up and end at 6.47% this year.
“The main reason for this deceleration is basically confidence,” Roberto Padovani, chief economist at Votorantim Ctvm, said in the article. Lack of “investment is really preventing the country from moving on.”
iShares MSCI Brazil Capped ETF
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Max Chen contributed to this article.