UPDATE 1-Brazil slashes 2012 GDP view to 3 pct

Sat Jul 21, 2012 1:06am IST

* Brazil cuts 2012 GDP view to 3 pct from 4.5 pct

* Gov't sees real averaging 1.95 per dlr this year

BRASILIA, July 20 (Reuters) - Brazil's government on Friday sharply lowered its economic growth forecast for this year to 3 percent from a previous 4.5 percent, underscoring the magnitude of the slowdown in Latin America's top economy.

The government also lowered its target for primary revenues this year and predicted that the local currency, the real , will average 1.95 per dollar this year.

Economic activity has slowed dramatically due the fallout of the European debt crisis and previous government efforts to prevent the economy from overheating.

The central bank last month revised its own economic growth forecast to 2.5 percent for 2012, from 3.5 percent previously.

Private economists are more pessimistic, with most predicting growth below 2 percent for the year and a few forecasting growth closer to 1.5 percent -- far below last year's 2.7 percent expansion and the red-hot 7.5 percent growth of 2010.

The Brazilian real has depreciated about 16.5 percent since hitting a 2012 high of 1.69 per dollar in late February. On Friday it was trading at 2.02 per dollar.

Policymakers are scrambling to lift Brazil out of the doldrums.

Under the leadership of Alexandre Tombini, the central bank has slashed the benchmark Selic rate by a total of 450 basis points since last August in a bid to stoke consumer spending.

President Dilma Rousseff's administration has also taken action to revive an industrial sector that is suffering one of its worst crises in decades with a barrage of tax breaks and billions of reais in cheap credit.