Brazil Economic Forecast

Brazil Economic Outlook

March 13, 2018

Growth accelerated notably in the last quarter of 2017, although it fell short of market expectations. It was led by strengthening household spending on the back of falling unemployment and low inflation and a turnaround in fixed investment. According to available indicators, the positive economic momentum seems to have carried over into the first quarter of this year. In January, the current account deficit narrowed year-on-year. Moreover, in February business confidence moved into optimistic territory for the first time since mid-2013, and the manufacturing PMI rose on the back of solid domestic demand and job creation. However, in the same month, consumer confidence dipped, remaining deeply entrenched in pessimistic territory. The government’s decision to postpone the reform of the country’s generous pension system prompted Fitch Ratings to downgrade Brazil’s credit rating from BB to BB- in late February. Fitch, which also revised the outlook from stable to negative, cited the bulky government debt and troubled political environment as additional reasons for the downgrade.

Brazil Economic Growth

Manageable inflation and improving labor market conditions should underpin consumer spending this year. A rebound in fixed investment is expected on the back of more favorable financing conditions due to monetary easing and rising business confidence. However, a market-unfriendly outcome from October’s elections poses the main downward risk to the outlook. FocusEconomics panelists see the economy growing 2.5% in 2018, unchanged from last month’s forecast, and 2.7% in 2019.

Brazil Economy Data

Population (million)199201203204206
GDP per capita (USD)12,36412,27812,1068,7928,731
GDP (USD bn)2,4642,4682,4551,7981,799
Economic Growth (GDP, annual variation in %)
Domestic Demand (annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)0.85.8-4.2-13.9-10.2
Industrial Production (annual variation in %)-2.32.1-3.0-8.3-6.5
Retail Sales (annual variation in %)
Unemployment Rate7.
Fiscal Balance (% of GDP)-2.3-3.0-6.0-10.2-9.0
Public Debt (% of GDP)53.751.556.365.569.9
Money (annual variation in %)
Inflation Rate (CPI, annual variation in %, eop)
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)
Policy Interest Rate (%)7.2510.0011.7514.2513.75
Stock Market (annual variation in %)7.4-15.5-2.9-13.338.9
Exchange Rate (vs USD)2.052.362.663.963.25
Exchange Rate (vs USD, aop)1.952.162.353.343.48
Current Account (% of GDP)-3.0-3.0-4.2-3.3-1.3
Current Account Balance (USD bn)-74.2-74.8-104.2-59.4-23.5
Trade Balance (USD billion)19.42.3-4.019.747.7
Exports (USD billion)243242225191185
Imports (USD billion)223240229171138
Exports (annual variation in %)-5.3-0.2-7.0-15.1-3.1
Imports (annual variation in %)-1.47.4-4.4-25.2-19.8
International Reserves (USD)373359364356365
External Debt (% of GDP)13.312.714.418.618.0

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Brazil Facts

Bond Yield9.49-0.82 %Mar 15
Exchange Rate3.29-0.13 %Mar 15
Stock Market84,928-0.40 %Mar 15

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