P R O J E T A THE ECONOMIST

Transcription

1 SCENARIOS OF THE BRAZILIAN ECONOMY Carlos Geraldo Langoni PricewaterhouseCoopers September / 2010

2 THE ECONOMIST

3 STRUCTURAL CHANGES WORLD LEVEL: MULTIPOLARITY; DOMESTICALLY: MACRO CONSENSUS.

4 MULTIPOLAR WORLD RECESSION x DEPRESSION: CENTRAL BANK POWER / GROWING ROLE OF EMERGING COUNTRIES; CHINA AND INDIA (SLOWDOWN) BRAZIL (FLAT) RUSSIA (DEEP RECESSION).

5 MULTIPOLAR WORLD The emerging economies, essential to absorb the crisis, should continue to lead the world growth... WORLD ECONOMY Region INTERNATIO NAL TRADE WO RLD ADVANCED ECONOMIES UnitedStates Euro Are a Japan EMERGING ECO NOMIES China India Russia Brazil

6 BRICS GDP GROWTH Despite recent acceleration, Brazilian performance is the lowest among the BRICS * CHINA 10% 10.6% INDIA 7.6% 8.4% RUSSIA % BRAZIL 4.3% 4.7% * excludes 2009.

7 BRICS INFLATION China has been able to combine high growth with low inflation CHINA 2.5% INDIA 6.7% RUSSIA 11.0% BRAZIL 6.5%

8 SUSTAINABILITY SOURCE OF GROWTH: LIBERALIZATION; EXPORT PLATFORM; INTERNAL MARKET; HIGH INVESTMENTS / SAVING RATIOS; HUMAN CAPITAL; INFRASTRUCTURE.

9 BRAZIL S MAIN FEATURE I LATE COMER (AFTER 2004); CONSISTENT MACRO ARCHITECTURE (1999 ON); STABILIZATION / EXTERNAL VULNERABILITIES; STRESS TEST; QUICK EXIT OUT OF THE CRISIS; CONTRAST WITH OTHER SHOCKS; INVESTMENT GRADE.

10 REBOUND Recession lasted only 2 quarters and Brazil was one of the first to leave the crisis... GDP GROWTH (In relation to the last quarter) Sector 4th Q st Q nd Q rd Q th Q st Q nd Q G D P Agriculture Manufacturing Services S ource: IBGE.

11 REBOUND Domestic consumption, leveraged by incentives and credit explosion, has led the exit out from crisis. The growth in real wage mass sustains the recovery. The re is also a healthy acceleration of investment... COMPONENTS OF DEMAND (In relation to the same quarter of last year) Sector 2nd Q rd Q th Q st Q nd Q G D P Families Consumption Government s Consumption Investment Exports Imports S ource: IBGE.

12 BRAZIL S MAIN FEATURE II CENTRAL BANK AUTONOMY: INFLATION TARGET; FISCAL ADJUSTMENT (PRIMARY SURPLUS); NET EXTERNAL CREDITOR (BUILDING UP RESERVES); A SOLID FINANCIAL SYSTEM: CREDIT EXPANSION; THE ROLE OF PUBLIC INSTITUTIONS (BNDES x B.B.).

13 BRAZIL S MAIN FEATURE III COMMODITY BOOM: CHINA IMPACT; INCREASING SHARE OF PRIMARY PRODUCTS; PRE-SALT IMPACT; A DIVERSIFIED / SOPHISTICATED ECONOMY; NO CONFLICT BETWEEN COMMODITIES AND INDUSTRIALIZATION; POLITICAL STABILITY.

14 COMMODITIES Commodity s prices are key indicator of the world economy s activity: even more influenced by China... COMMODITIES INDEX 275 $ basis 2000 = Total: +16.5% / Food: +12.0% / Metals: +15.1% (% a year) Jan. / Mar Mai Jul Nov Jan. / Mar Mai Jul Nov Jan. / Mar Mai Jul

15 COMMODITIES BOOM The rising price of commodities, pushed by China, is changing the composition of Brazilian exports... EXPORT COMPOSITION January - August (%) Period Primary Semimanufacturing Industrialized

16 FHC x LULA Despite a deep fall in 2009, GDP average growth was higher during Lula government % GDP GROWTH F H C L U L A

17 INFLATION Inflationary expectations have somehow adjusted, reflecting Central Bank credibility... 5,75 % INFLATIONARY EXPECTATIONS (IPCA) 5,50 5, ,00 4,75 4, ,25 Jan Fev Mar Abr Mai Jun Jul Ag o

18 THE CENTRAL BANK AUTONOMY The Central Bank s autonomy was crucial to minimize the impact of crisis by cutting compulsory rates and the SELIC. This year, it had to tighten up again % INTEREST RATES (SELIC) Jan/08 Mar Abr Jun Jul Out Dez Jan/09 Mar Abr Jun Ago Out Dez Jan/10 Mar Abr Jun Jul

19 EXCHANGE FLOATING In contrast with othe r shocks, there was no explosion of devaluations due to the cushion of international reserves. There is a new equilibrium level, more appreciated... 2,40 2,30 R$ / US$ EXCHANGE RATE 2,20 2, ,00 1,90 1,80 1,70 1,60 1,50 Jan/08 Mar Mai Jul Nov Jan/09 Mar Mai Jul Nov Jan/10 Mar Mai Jul

20 COUNTRY-RISK The external turbulence has not changed the favorable perception of country-risk, that received from Moody s the investment grade. With the end of elections and improvement in the fiscal area, a new upgrade may happen Basis Points BRAZILIAN RISK Jan / 2008 Mar May Jul Nov Jan / 2009 Mar Mai Jul Nov Jan / 2010 Mar Mai Jul

21 SUSTAINABILITY STRONG EXPANSION OF INTERNAL DEMAND; PRIVATE CONSUMPTION AND INVESTMENT; HIGH LEVEL OF CONFIDENCE; IT IS NOT A BUBBLE: REAL WAGE MASS / CREDIT; INTEREST RATES ARE STILL HIGH.

22 SUSTAINED GROWTH Brazilian growth should be sustained by the impressive inflow of external investments, reflecting macro stability and a declining political risk US$ billion FOREIGN DIRECT INVESTMENT

23 SUSTAINED GROWTH It should also reflect a fast expansion of investment... INVESTMENT RATE 22 % of GDP

24 SOCIAL DIMENSION STABILITY AS PRE-CONDITION; ACCESS TO EDUCATION; GAINS IN REAL WAGES / FORMAL EMPLOYMENT POLICIES OF INCOME TRANSFER: MINIMUM WAGE AND BOLSA FAMÍLIA ; REDUCTION IN INEQUALITY AND POVERTY; THE NEW MIDDLE CLASS.

25 SOCIAL DIMENSION A new pattern of development is being characterized by the systematic fall of inequality and the increase of social mobility with a growing middle class... GINI INDEX 0,550 0,540 0,530 0,520 0,510 0,500 0,490 0, * 2009 * 2010 * Source: IBGE.

26 SOCIAL DIMENSION The combination of stability, increasing access to education and programs of income transfer, led to a strong fall in poverty EXTREME MISERY (Average in 12 Months) Mar/03 Jun Mar/04 Jun Dez Mar/05 Jun Dez Mar/06 Jun Dez Mar/07 Jun Dez Mar/08 Jun Dez Mar/09 Jun Dez Source: Marcelo Neri, FGV (Centro de Políticas Sociais).

27 CHALLENGES - TRANSITION TO SUSTAINED GROWTH; - COMPETITIVENESS (REFORMS); - DUALISM: PUBLIC SECTOR x PRIVATE SECTOR; - DOMESTIC SAVING x INVESTMENT; - INFRASTRUCTURE: REGULATORY FRAMEWORK; - EDUCATION; - WORLD CUP / OLYMPICS.

28 RISKS - MACRO MISTAKES (CENTRAL BANK AUTONOMY / FISCAL POLICY / EXCHANGE CONTROLS); - THE ROLE OF THE STATE; - WORLD RECESSION (W).

29 EXPECTED GDP GROWTH EXTERNAL INTERNAL SCENARIO SCENARIO Gradualism Competitiveness Neo-populism Sustained 5% 6% 2% Soft Landing 4% 5% 0% Discontinuity 1% 3% recession