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Citi cuts Brazil growth, inflation forecasts on coronavirus fallout

BRASILIA, Feb 18 (Reuters) - Economists at Citi have cut their Brazilian economic growth and inflation forecasts, citing the fallout from the coronavirus outbreak in Brazil's largest trading partner China.

The U.S. bank now expects gross domestic product growth of 2.0% this year, down from 2.2% previously, and becomes the latest major bank to lower its outlook for Latin America's largest economy.

The 2.0% growth figure represents a psychological threshold Brazilian policymakers will be keen to hurdle this year, following three years of weak recovery and subdued growth around 1% following the 2015-16 recession.

"The significant downward revision in China's Q1 2020 GDP growth expectation ... will likely mean a global headwind for the Brazilian economy through the export channel," Citi's Leonardo Porto and Paulo Lopes wrote in a note on Tuesday, noting that China accounts for 28% of all Brazilian exports.

Porto and Lopes now expect 2.0% GDP growth in each calendar year out to 2024.

They also lowered their 2020 inflation forecast to 3.5% from 3.8%, well below the central bank's official 4.00% target, and now expect the central bank to keep its benchmark Selic interest rate at a record low 4.25% well into next year.

(Reporting by Jamie McGeever)