Brazil Economic Forecast

Brazil Economic Outlook

September 12, 2017

Recently-released data indicates that GDP grew for the first time in over three years in Q2, confirming that the economy has turned a corner. The upturn was largely due to tailwinds to private consumption from falling inflation and a one-off decision allowing workers to make early withdrawals from a government severance fund. Export growth also accelerated in the quarter. The recovery remains tentative despite the good news, and incoming data for Q3 is patchy: consumer confidence fell to a seven-month low in August, while the manufacturing PMI recovered some lost ground. On the political front, developments have also been mixed. In September, a critical reform to reduce subsidized lending for businesses from government-owned bank BNDES was passed, which faced heavy opposition from industry leaders, but should help correct government finances and improve the effectiveness of monetary policy. While the reform is a win for the government, austerity measures are still facing an uphill battle, as underscored by the government’s easing of budget targets. Unable to convince legislators to support tax hikes, the government announced it would revise upwards its primary deficit targets for all years through 2020.

Brazil Economy Data

20122013201420152016
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 %)1.93.00.5-3.8-3.6
Domestic Demand (annual variation in %)1.93.70.3-6.4-5.2
Consumption (annual variation in %)3.53.52.3-3.9-4.2
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 %)8.44.32.2-4.4-6.3
Unemployment Rate7.47.16.88.511.5
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 %)9.110.99.96.33.8
Inflation Rate (CPI, annual variation in %, eop)5.85.96.410.76.3
Inflation Rate (CPI, annual variation in %)5.46.26.39.08.7
Inflation (PPI, annual variation in %)9.15.12.211.37.7
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

ValueChangeDate
Bond Yield9.63-0.72 %Sep 21
Exchange Rate3.140.17 %Sep 21
Stock Market75,604-0.53 %Sep 21

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Brazil Economic Growth

September 12, 2017

Battered government finances and an uncertain outlook for reforms given the fragile political environment are threatening the economic recovery, despite a positive Q2 GDP print. Local media reported that President Michel Temer is likely to face another corruption charge in the coming weeks, which could push reforms to the back burner. Our panelists see GDP growing a measly 0.6% in 2017, which is up 0.2 percentage points from last month’s forecast. Next year, the recovery is seen gaining speed and GDP increasing 2.2%.

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