Economic Outlook. Macro Research Itaú Unibanco

Transcription

1 Economic Outlook Macro Research Itaú Unibanco June, 2013

2 Agenda Economia Global Heterogeneous growth: U.S. growing faster, Europe in recession. Deceleration in the emerging economies. The Fed signals a reduction in assets purchases. Stronger dollar and higher interest rates in international markets. América Latina: desaceleração da atividade, depreciação cambial e menor espaço para queda de juros atingem o grupo, com intensidades distintas em cada economia. Brasil GDP disappoints again in 1Q13. Slow growth in the last few years is a consequence of structural problems. Inflation under pressure, but likely to retreat temporarily in the second semester. The Brazilian real has moved with other currencies as the dollar appreciates at a global level, but inflationary pressures prevent a further devaluation of the real. The Copom hikes the Selic interest rate. How much? 2

3 Heterogeneous Performance Real GDP Index, 2007 = forecast World USA 100 Eurozone Source: Itaú Unibanco, BEA, Haver Analytics 3

4 China: Focus on Reforms, Lower Growth Recent policy signaling reflects less concern about short term growth and more focus on structural reforms that can lead to long run sustainable growth. GDP Growth YoY, % 15.0% 12.5% 10.0% 7.5% 5.0% Source: Itaú Unibanco, CEIC 4

5 Emerging Economies Decelerate GDP Growth Emerging Economies QoQ, SAAR 3.3% 1.7% Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Countries: Brazil, Mexico, Chile, Colombia, South Korea, Singapore, Taiwan, Indonesia, Malaysia, Thailand, Russia, Ukraine, Poland, Hungary, Czech Republic, Turkey, South Africa Source: Itaú Unibanco, Haver Analytics, FMI 5

6 The Fed Signals a Reduction in Stimulus Expectations that the Fed will reduce its asset purchases has led to worldwide dollar appreciation and higher long interest rates in international markets. 10-Year Bonds Yields %, 5-day Moving Average Dollar Appreciation Exchange Rates, % Change in May Developed Economies Emerging Markets Eurozone UK Canada Japan Australia Taiwan South Korea Singapore Russia Peru Colombia Turkey India 4.0 jan-13 fev-13 mar-13 abr-13 mai-13 jun-13 Mexico Turkey Hungary South Africa USA (rhs) 1.5 Mexico Chile Brazil South Africa Source: Itaú Unibanco, Haver Analytics, Bloomberg 6

7 World: Our Expectations for the Short Term World USA Eurozone Japan China Source: Haver, CEIC, Bloomberg, Itaú Unibanco 7

8 Commodities: Our Expectations for the Short Term Itaú Unibanco Commodities Index Source: Itaú Unibanco 8

9 Latin America: Growth Divergence Peru Mexico GDP - % GDP - % PEN / USD (YE) MXN / USD (YE) Interest Rate - (YE) - % Interest Rate - (YE) - % CPI - % CPI - % Colombia Chile GDP - % GDP - % COP / USD (YE) CLP / USD (YE) Interest Rate - (YE) - % Interest Rate - (YE) - % CPI - % CPI - % Argentina GDP - % ARS / USD (YE) BADLAR - (YE) - % CPI - % (Private estimates) Source: Itaú Unibanco 9

10 Growth in Brazil Disappointed GDP Forecasts for 2012 (%) GDP Forecasts for 2013 (%) Brazil Mexico Colombia Chile Brazil Mexico Colombia Chile Source: Latin Focus Consensus Forecasts 10

11 Brazil: Our Expectations for the Short Term Economic Activity GDP % Inflation IPCA % Monetary Policy Selic Rate % Fiscal Primary Surplus Balance of Payments Exchange Rate (eop) Current Account (% GDP) Source: Itaú Unibanco and BCB 11

12 What Explains the Weak GDP in the Last Few Years? 5% 4% 3% 2% 1% 0% -1% GDP Growth Breakdown QoQ, SAAR -2% 2009.IV 2010.IV 2011.IV 2012.IV Consumption Investment Inventories & residual Gov. Expenditure Exports - imports GDP Deleveraging: Higher real interest rates (+150 bps) Macroprudential measures (reserve + capital requirements) Reduction in government current expenditure growth (to 0% from 10%-15%) Reduced BNDES disbursements Global risk aversion (VIX up to 40) High inventories, decelerating growth and imports Supply Issues: Fiscal expansion and interest rate cuts; economy reacts slowly Excessive interventionism creates higher economic policy risk Productivity deceleration seems stronger than cyclical factors; lower potential growth With low productivity growth, rising wages reduce margins and become a limitation on investment Inflation accelerates, affecting real income and consumption Signs of growing net imports Source: Itaú Unibanco, IBGE 12

13 Gradual Recovery Reflects Lower Potential GDP GDP (% Change, QoQ/sa) GDP Annual Growth 2.5% 8% 7.5% 2.0% 1.5% 7% 6% 5% 5.7% 6.1% 5.2% 1.0% 0.5% 0.0% 0.6% 0.8% 0.6% 0.5% 4% 3% 2% 1% 1.2% 3.2% 3.9% 2.7% 0.9% 2.8% 2.4% 0% -0.5% 2010 Q Q Q Q1-1% -0.3% Source: Itaú Unibanco, BCB 13

14 Growth Diffusion Points to Weak Activity Ahead GDP vs. Diffusion Index Broad Data Set - Diffusion 90% 80% 70% 60% 50% 40% 30% 20% % 11% 9% 7% 5% 3% 1% -1% -3% -5% -7% -9% 90% 80% 70% 60% 50% 40% 30% 20% Diffusion index (-2) GDP 4Q (rhs) month 3MMA historical average Source: Itaú Unibanco 14

15 Confidence Remains Weak Industry Confidence Index (FGV) Consumer Confidence Index (FGV) Source: Itaú Unibanco, FGV 15

16 Will the Labor Market Remain Tight? In our basic scenario, with GDP growing around 2.8% in 2013, the labor market doesn t cool down. Unemployment Rate %, sa Average Real Wages sa (2003=100) Year average Change in year % % % Source: IBGE, Itaú Unibanco 16

17 Exchange Rate Volatility Leads to Interventions and Loosening of Capital Controls Exchange Rate Reais per Dollar Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Source: Itaú Unibanco, BCB, Bloomberg 17

18 Exchange Rate Policy Is Constrained by Inflation Exchange Rate Pass-Through 10% Devaluation of the Brazilian Real 0.8% 0.7% 0.6% 0.5% 0.5% 0.6% 0.7% 0.4% 0.3% 0.2% 0.1% 0.0% 0.1% Number of Quarters After Devaluation Currency Devaluation - 5% 10% Exchange Rate IPCA % 6.0% 6.3% IPCA % 6.1% 6.2% Source: Itaú Unibanco 18

19 IPCA Likely to Retreat Temporarily, but Pressure Will Remain Tax breaks and food prices help to reduce inflation in the short run. IPCA Consumer Price Index 0.90% 7.0% 0.75% 6.2% 6.6% 6.7% 6.2% 6.5% 0.60% 6.2% 6.0% 0.45% 0.30% 5.6% 5.5% 0.15% 4.9% 5.0% 0.00% Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Monthly 12-month (rhs) 4.5% Source: Itaú Unibanco, IBGE 19

20 Selic: We Expect Hikes in a Faster Pace Selic Rate % 20% 18% 16% 14% 12% 10% 8% Selic 8.75% 6% 4% Real interest rate 2% 0% Source: Bloomberg and Itaú Unibanco 20

21 Current Account Financing Depends on More Volatile Flows US$ billion Average Current account FDI Portfolio FDI Others Balance of payments Source: Itaú Unibanco, BCB 21

22 Higher Tax Exemptions in 2013 Last tax exemptions announced: Consumer staples: R$ 7 billion (2014). Tax breaks for 14 more sectors: R$ 6 billion (2014). IPI on vehicles: R$ 2 billion (2013). Recently announced tax exemptions R$ bn % of GDP % of GDP % of GDP Already announced Expected Source: Itaú Unibanco, Ministry of Finance 22

23 More Expansionary Fiscal Stance Primary Surplus (% GDP) Conventional Structural Source: Itaú Unibanco, BCB 23

24 Challenges Relatively High Labor Costs Manufacturing Sector Hourly Compensation Costs in 2011 (USD) Change in Unit Labor Costs in USD Terms ( ) % 80% 70% 8 60% 36% 50% 6 40% % 20% 10% 0% -10% 9% 26% -8% -1% 10% 20% 2% -3% 4% 12% 42% 0 Brazil Hungary Poland Mexico Phillippines -20% China South Korea Israel Mexico Poland Brazil Real exchange rate change Net costs Source: U.S. Bureau of Labor Statistics 24

25 Sweden France Germany Hungary Ukraine Poland Brazil Russia Spain Autralia USA South Korea Argentina Turkey Colombia Chile India China Venezuela Mexico Arab Emirates Challenges Heavy Tax Burden Tax Burden % of GDP 60% 50% 40% 34% 30% 20% 10% 0% Source: Heritage Foundation, International Energy Agency (2011); Design: Itaú Unibanco 25

26 Challenges: Infrastructure, Productivity Infrastructure Ranking (World Economic Forum) Ease of Doing Business 2012 Ranking (World Bank) Hong Kong Singapore 1 2 Chile 37 Germany 3 Peru 43 Chile 45 Colombia 45 Russia China Mexico 48 Turkey 51 Uruguay 89 Mexico 68 Paraguay 103 Brazil India Argentina 124 Peru 89 Brazil 130 Source: World Economic Forum, World Bank 26

27 Challenges - Less Labor, Need More Investment Labor contribution decreases. Growth depends on increasing investments and productivity. GDP Growth Decreasing Labor Contribution 8% 2.0% Labor Capital Productivity 7% 6% 1.5% 5% 4% 1.0% 3% 2.7% 2.8% 2.4% 2% 0.5% 1% 0.9% 0% % Source: IBGE, Itaú Unibanco and U.S. Bureau of Labor Statistics 27

28 Spending on social security (% GDP) Challenges Lack of Domestic Savings Public Spending on Social Security 20% 18% Italy 16% Poland 14% 12% Brazil 10% 8% 6% 4% Mexico USA Japan 2% 0% Colombia 5% 10% 15% 20% 25% 30% Population aged 65+ (% total) Source: IBGE and Itaú Unibanco 28

29 China Challenges - Domestic Savings Must Increase to Enable Investments to Grow Japan Mexico Peru Chile Argentina Colombia Canada Brazil South Africa UK USA Domestic Savings (%, 2011) Investment Rate 22% 54 21% % % 13 18% % 16% 15% Source: IMF and Itaú Unibanco 29

30 Conclusion World: Asymmetric growth in the advanced economies and deceleration in the emerging economies. Signals of monetary policy changes in the U.S. lead to a stronger dollar and higher interest rates in the international markets. Brazil: What explains weak GDP? High costs reducing margins, production and investment; deleveraging in the economy. The Brazilian real has moved with other currencies as the dollar appreciates on a global level, but inflationary pressures prevent a further devaluation. Inflation is likely to retreat temporarily in the second semester, but remains under pressure. We expect the SELIC interest rate to rise to 8.75%. 30

31 Long-Term Scenario Source: Itaú Unibanco 31