RIO DE JANEIRO – Private economists consulted by Brazil’s central bank have slashed their growth forecasts for this year in Latin America’s biggest economy in half.

The sharp downward revision was made a few days after the government reported that the economy shrank 3.6 percent in the October-December 2008 period, the sharpest quarterly contraction in 12 years.

In light of the pronounced drop in economic activity and the negative effects expected this year, according to the survey released Monday by the central bank, economists now expect Brazil’s economy to barely grow 0.59 percent in 2009 and 3.5 percent in 2010.

The forecasts come from the weekly surveys of around 100 private economists at banks and private financial services firms conducted by the central bank.

A month ago, the survey respondents expected this year’s growth rate to come in at 1.5 percent. As recently as last week, the private-sector economists forecast that Brazil’s gross domestic product would grow 1.2 percent in 2009.

The economists also expressed pessimism about the outlook for industry, the sector most affected by the global financial crisis this year.

A week ago, economists consulted by the central bank expected industrial production to rise 0.04 percent this year, but the latest survey forecasts a contraction of 1.59 percent.

Economists expect Brazil to end the year with an inflation rate of 4.52 percent and that the real will be trading at 2.30 to the dollar.

Though the Brazilian economy still managed overall growth of 5.1 percent in 2008, the fourth-quarter GDP figure released last week was worse than expected and led analysts and business leaders to question the government’s optimistic forecast for this year.

“So far, everything indicates there will not be a technical recession, because we already have signs of recovery in the first quarter” of this year, Finance Minister Guido Mantega said, while acknowledging it would be difficult to meet the 2009 growth target of 4 percent.

The government will continue “taking measures and activating the economy with programs to emerge from the crisis sooner than others,” the minister said.

Pointing to continuing job losses and declines in consumer spending, Brazil’s unions say the situation is more serious than President Luiz Inacio Lula da Silva’s administration is prepared to admit.

Manufacturing, a pillar of the Brazilian economy, shrank 7.4 percent in the last three months of 2008.

The release of the fourth-quarter GDP figure prompted the leader of the FIESP trade association representing industry in Sao Paulo state, Paulo Skaf, to call on Brazil’s central bank to slash its benchmark interest rate from 12.75 percent to 8 percent.

“Industry needs to grow, from February on, around 2 percent (per month) for all the months of the year,” the business leader said.

The political opposition seized on the fourth-quarter numbers to criticize Lula for his handling of economic policy.

“President Lula continued treating the crisis as something temporary and did not anticipate by taking measures at the right moment, when the economy was fine,” Congressman Rodrigo Maia said.

Yet, within weeks of the meltdown in world financial markets, Lula’s administration provided extra liquidity to Brazilian banks and construction companies, cut sales taxes and funneled money to lenders. EFE