5 things: Brazil's economic downturn and what to expect going forward
Brazil's economy has had a tough time of it so far this year. The truckers' strike, the depreciating real and the uncertainty regarding presidential elections have all contributed to Brazil's economic woes in 2018. In this post, Senior Economist Angela Bouzanis answers some key questions regarding Brazil's economic outlook as we head into 2019.
1. Brazil's economic outlook has worsened considerably since the start of 2018. What has caused more pessimistic view on economic outlook?
The unexpected nationwide truckers’ strike over diesel in May–June was a shock to our economic forecasts and caused analysts to substantially downgrade their projections for Brazil’s economy due to the consequent widespread economic disruptions. On top of this, a less supportive external environment due to tighter global financial conditions and higher oil prices has also weighed on the country’s outlook, along with lacklustre economic data.
2. How did the truckers' strike earlier this year impact Brazil's economy?
The truckers strike caused widespread disruptions to the Brazilian economy, ultimately denting growth. The Central Bank’s economic activity indicator recorded the worst drop on record in May, industrial production plummeted at the fastest pace in nearly 10 years and exports of goods also plunged as the strike prevented goods from reaching the country’s ports. Moreover, inflation also spiked in June as goods shortages drove up prices. However, most of the effects of the strike were largely temporary and economic data for the more recent months has stabilized.
3. There has been significant uncertainty regarding the potential outcome of Brazil's presidential election and what polices will be pursued by the new administration. How has this affected the economic outlook this year?
The election has created a great deal of uncertainty over Brazil’s future policy and economic trajectory. Corruption scandals, epitomized by the Lavo Jato (“Car Wash”) investigation, combined with an entrenched economic crisis, have decimated most of the country’s traditional political elite, opening the field for relatively unknown contenders as voter disenchantment has soared. The uncertain political atmosphere has taken a toll on economic sentiment, likely boding poorly for investment. In addition, politics, along with a broader emerging-markets selloff, have caused the real to plummet to levels not seen in years. This will amplify price pressures going forward, and likely ultimately lead to the Central Bank hiking rates in the coming year, reducing support for the recovery.
4. What challenges does Brazil's economy face in the over the next few years?
A high level of public debt is one of the key challenges facing the economy, and policymakers need to work on improving public finances to bring the fiscal deficit down. More broadly, bringing about a stronger recovery after the worst recession in the country’s modern history, as well as modernizing the economy and boosting its future growth potential.
5. Is there anything to provide some optimism regarding the Brazilian economy?
The current account deficit has narrowed substantially in recent years and is fully financed by strong inflows of foreign direct investment. While the country also holds a large amount of international reserves which can help act as a buffer against economic turbulence.
Brazil economic outlook
Brazil’s prospects were downgraded for the fourth month in a row following a modest Q2 GDP outturn. In addition, a less supportive global backdrop and the weakening of the real cloud the country’s outlook. A market-friendly outcome to the election remains crucial to ensuring a sustainable recovery. FocusEconomics panelists now see the economy growing 1.6% this year, down 0.1 percentage points from last month’s forecast. Next year, GDP is seen growing 2.5%.
5-year economic forecasts on 30+ economic indicators for 127 countries & 30 commodities.
Date: October 8, 2018
TagsConsensus Forecast Africa Investment USA Russia UK Nordic Economies oil prices United Kingdom Commodities India Iran Portugal Euro Area G7 Ukraine Trade TPP Company News Italy IMF Japan Vietnam Brazil Colombia OPEC Cryptocurrency Bitcoin Agricultural Commodities Asia Forex European Union Banking Sector Mexico MENA Major Economies Energy Commodities Australia Inflation Spain Canada Venezuela China Emerging Markets Infographic Sub-Saharan Africa Healthcare Unemployment rate Turkey Exchange Rate Tunisia Housing Market Brexit Latin America Argentina Eastern Europe Gold precious metals Precious Metals Commodities France South Africa Economic Growth (GDP) United States Greece Oil Germany Base Metals Commodities
1 hour ago
2 hours ago
A more stable political environment coupled with strong growth in the United Statesboosting demand for exportssho… https://t.co/1sn7XyZhMP
3 hours ago
Singapore economic growth cools to a two-year low in the third quarter. Full story + new GDP forecasts:… https://t.co/RZ8kmZYJBW
4 hours ago
Over the next few quarters, Central America and the Caribbean should continue to benefit from solid domestic demand… https://t.co/7OilR3sA7V
5 hours ago
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- The Poorest Countries in the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Gold: The Most Precious of Metals (Part 3)
- Venezuela's Electoral Conundrum
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- The World's Top 10 Largest Economies
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Russian economy update in wake of OPEC deal announcement
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- The Wisdom of the Crowds and the Consensus Forecast
- There's no end in sight to the Venezuela crisis
- Can the peso predict the U.S. election results?
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit