Download brazil

BRAZIL: ECONOMIC PERSPECTIVES
Gustavo Loyola
[email protected]
Plan of presentation
Brazil in the financial crisis
Macroeconomic perspectives
2
3
Brazil in the financial crisis
Macroeconomic perspectives
Overview
Domestic Scenario
 Three main channels of contagion of international
financial crisis into the country:
 Credit;
 Exports and foreign trade;
 Expectations and confidence.
 Impacts on the domestic economy were both mild
and short. Main reasons for these were:
 Strong fundamentals of Brazilian economy prior to the
crisis;
 Sound state of financial sector in Brazil;
 Recent growth mainly spurred by domestic factors;
 Countercyclical policies (fiscal and monetary).
4
Credit – New bank loans (monthly averages, seasonally
adjusted, constant values, R$ million)
Sep. 08
115,000
59,000
Source: Brazilian Central Bank
Individuals
Jul-09
Aug-09
Jun-09
Apr-09
May-09
Mar-09
Feb-09
Jan-09
Nov-08
Dec-08
Oct-08
Aug-08
Sep-08
Jul-08
Jun-08
Apr-08
Companies
May-08
Mar-08
Jan-08
45,000
Feb-08
80,000
Dec-07
47,000
Oct-07
85,000
Nov-07
49,000
Aug-07
90,000
Sep-07
51,000
Jul-07
95,000
Jun-07
53,000
May-07
100,000
Apr-07
55,000
Mar-07
105,000
Feb-07
57,000
Jan-07
110,000
5
Industrial production (index, seasonally adjusted)
 Peak-to-through fall of 20.9% in 2008 Q4; Recovered 13.5% since then.
% yoy: 2007: 6.0%
2008: 3.1%
2009(f): -8.7%
2010(f): 9.3%
Projection
135
130
125
120
115
110
105
Source: IBGE (forecast Tendencias)
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
100
6
Source: IBGE
200
115
180
112.5
160
110
140
107.5
120
105
100
102.5
80
100
Jan-09
May-
Jan-09
May-
May-
Jan-08
Sep-
May-
Jan-07
Sep-
Semi & Non Durable consumption
Sep-
May-
Jan-08
Sep-
May-
Jan-07
Sep-
May-
Jan-06
Sep-
May-
Capital goods
Sep-
May-
Durable consumption
Jan-06
Sep-
May-
110
Jan-05
May-
Jan-09
Sep-
May-
Jan-08
Sep-
May-
Jan-07
Sep-
May-
Jan-06
Sep-
May-
Jan-05
170
Jan-05
May-
Jan-09
Sep-
May-
Jan-08
Sep-
May-
Jan-07
Sep-
May-
Jan-06
Sep-
May-
Jan-05
Industrial production (index, seasonally adjusted)
7
Intermediary goods
210
190
125
115
150
130
105
95
8
Domestic activity
Unemployment rate
Spectacular fall since 2004,
reaching lowest ever levels in
Dec 08.
Reversal of downward trend in
early 2009.
Retail sales (index, seasonally adjusted)
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
14%
13%
12%
11%
10%
9%
8%
7%
6%
Projection
180
% yoy: 2007: 9.7%
2008: 9.1%
2009(f): 5.1%
2010(f): 7.0%
170
160
150
140
130
120
110
100
Source: IBGE
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
90
9
GDP growth (annual rates)
Year/weight
GDP
100.0%
2004
2005
2006
2007
2008
2009
2010
5.7%
3.2%
4.0%
5.7%
5.1%
-0.1%
4.8%
Households Government
60.7%
20.2%
3.8%
4.5%
5.2%
6.3%
5.4%
2.6%
5.2%
Year/weight
Agriculture
6.7%
2004
2005
2006
2007
2008
2009
2010
2.3%
0.3%
4.5%
5.9%
5.8%
-2.3%
3.9%
Source: IBGE (forecast Tendencias)
4.1%
2.3%
2.6%
4.7%
5.6%
2.9%
5.1%
Demand
Investment
19.0%
Exports
14.3%
Imports
14.2%
9.1%
3.6%
9.8%
13.5%
13.8%
-12.7%
7.2%
15.3%
9.3%
5.0%
6.7%
-0.6%
-10.5%
6.5%
13.3%
8.5%
18.4%
20.8%
18.5%
-14.6%
13.0%
Supply
Industry
Services
27.9%
65.3%
7.9%
2.1%
2.3%
4.7%
4.3%
-5.1%
7.1%
5.0%
3.7%
4.2%
5.4%
4.8%
3.6%
4.6%
Taxes
15.5%
6.4%
4.4%
5.7%
8.4%
7.4%
-2.3%
4.9%
10
Brazil in the financial crisis
Macroeconomic perspectives
11
Forecast for 2009-2010
Indicator
2009
2010
GDP Growth (%)
(0.0)
4.8
Inflation (CPI) - %
4.2
4.2
Benchmark interest rate (Selic) - %
8.75
10.00
F/X (R$/US$)
1.75
1.70
Trade Balance (US$ bi)
15.6
25.0
Current Account (US$ bi)
(18.7)
(22.6)
Brazil outlook
Why does Brazil have good perspectives?
 Reduced geopolitical as well as political risks (contrast with other Bric’s):
•
Democratic institutions
•
Market economy
•
Absence of ethnic conflicts
•
Pacific relations with neighbouring countries
 Safeguard of macroeconomic stability:
•
Law of Fiscal Responsibility
•
Inflation targeting regime
•
Floating exchange rate
•
De facto Central Bank independence
 Vast and increasing domestic market for consumption goods
12
Brazil outlook
 Expanding credit markets:
•
Credit to GDP ratio went from 30% in Dec 06 to 45% (currently)
 Important regional player:
•
35% of Latin American and Caribbean (LAC) GDP
•
33% of LAC population
•
Diversified economy, sophisticated financial markets
 Important producer of several commodities:
•
Brazil is one of the largest world producer and exporter for: soya
beans, corn, coffee, cotton, sugar, orange juice, cattle and veal,
poultry, iron ore
 Important player on different energy sources: biofuel (ethanol), oil (pre
salt)
 Big events: Football World Cup (2014), Summer Olympic Games (2016)
•
Brazil will be in the spotlight
•
Investment in infra-structure and services
13
Summary
 Coming years will be good for Brazil.
 Economic growth led by domestic sectors (consumption and
investment) based on employment growth, income and
credit.
 Exchange rate keeps strong value due to the flow of
resources into Brazilian economy.
 Risks: medium-term economic growth is constrained by
growth of potential GDP, which, in turn, is affected by (lack
of) investment in infrastructure, human capital, and micro
structural reforms (tax, labor, social security).
14
15
Rua Estados Unidos, 498, 01427-000, São Paulo, SP
Tel 55-11 3052-3311, Fax 55-11-3884-9022
tendencias@tendencias,com,br
www,tendencias,com,br