Green Shoots Consumption-led cyclical recovery and needed reforms

Transcription

1 Green Shoots Consumption-led cyclical recovery and needed reforms November, 2017 FERNANDO HONORATO BARBOSA Chief Economist, Director 1

2 The economy is improving. Families have deleveraged quite well

3 Endividamento e comprometimento HOUSEHOLD DEBT Debt service ratio as % of disposable income Household debt Household debt ex. housing Debt Service Ratio Debt Service Ratio ex. housing Source: BCB, Bradesco

4 Companies are also seeing an improvement in their operational balance sheets

5 MANUFACTURING INVENTORIES Seasonally adjusted 57 Month 55 3 months Average 53 51, , Source: Bradesco Business Survey 5

6 Título do Gráfico JOBS AND GDP Employment and IBC-BR 150,0 148,0 146,0 144, , ,0 138,0 136,0 134,0 Monthly GDP (left) Formal employment (right,mn) 135,1 45, , Source: CAGED, BCB, Bradesco 6

7 Inflation will be below target in 2018

8 NUCI com ajuste sazonal CAPACITY UTILIZATION - INDUSTRY Seasonally adjusted, % 86,0 84,0 Capacity utilization Average since ,0 80,0 80,5 78,0 76,0 74,0 74,3 72,0 Source: FGV, Bradesco

9 WAGE INCREASES Business survey, all sectors, % 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4, ,9 Source: Bradesco 9

10 CURRENT ACCOUNT AND FDI USD Billions, 12 months Current account deficit FDI 83,6 12,5-40 jul-97 jul-99 jul-01 jul-03 jul-05 jul-07 jul-09 jul-11 jul-13 jul-15 jul-17 Source: IBGE, Bradesco 10

11 POLICY RATE Selic, % p.a. 15,0% 14,0% 13,0% 12,0% 11,0% 10,0% 9,0% 8,0% 7,0% 6,0% 5,0% 13,75% 12,75% 8,75% 12,50% 10,50% 7,25% 11,00% 14,25% 11,25% 10,25% 9,25% 8,25% 8,00% 7,50% 6,75% Source: BCB, Bradesco 11

12 And the economy is starting to respond...

13 Título do Gráfico NEW ORDERS-TO-INVENTORIES Manufacturing and retail 1,2 1,1 1,0 New orders / inventories (retail) New orders / inventories (manufacturing) 1,04 1,03 0,9 0, Source: Bradesco Business Survey 13

14 EMPLOYMENT Seasonally adjusted jan/12 mai/12 set/12 jan/13 mai/13 set/13 jan/14 mai/14 set/14 jan/15 mai/15 set/15 jan/16 mai/16 set/16 jan/17 mai/17 set/ , , , , , ,0 Sources: FGV, Bradesco 14

15 GDP GROWTH % QoQ, s.a. 3,0% 2,3% 2,0% 1,6% 1,0% 0,0% -1,0% -2,0% 0,0% 0,7% 0,3% -0,1% 0,4% 0,5% 0,0% -1,3% 0,3% -1,2% -0,9% -1,4% 1,0% 0,2% 0,5% 0,2% 0,8% 0,8% -0,4% -0,5% -2,3% -3,0% mar-12 dez-12 set-13 jun-14 mar-15 dez-15 set-16 jun-17 mar-18 dez-18 Sources: IBGE, Bradesco 15

16 Thinking medium term

17 GDP PER CAPITA 2016, PPP Latin America Developed Countries Peers Chile 23,969 US 57,294 New Zealand 37,108 Uruguay 21,570 Australia 48,806 Czech Rep. 33,223 Argentina 20,171 Canada 46,240 Poland 27,715 Mexico 18,865 Japan 38,894 Hungary 27,211 Brazil 15,211 Korea 37,948 Russia 26,109 Colombia 14,162 Spain 36,451 Turkey 21,147 Peru 13,019 Italy 36,313 Bulgaria 20,116 Bolívia 7,191 Portugal 28,515 Thailand 16,835 Brazil 15,211 China 15,424 Brazil 15,211 South Africa 13,179 India 6,658 Sources: FMI, Bradesco 17

18 Título do Gráfico PER CAPITA INCOME Share of USA income, % 60% 50% South Korea / USA Brazil / USA China / USA 40% 30% Education, productivity and trade liberalization 20% Reforms 10% Savings 0% Source: IBGE, Bradesco 18

19 INVESTMENTS % of GDP 21,5% 21,0% 20,5% 19,5% 18,5% 17,5% Misallocation of capital, protectionism, frequent regulatory change, lack of Federal Budget to invest 16,5% 15,5% 16,5% ,1% Sources: IBGE, Bradesco 19

20 PUBLIC DEBT / GDP 1% GDP, varying real PIB interest 2%, variando rates juros, and 5-year com teto cap valendo on expenditure ate % of interest rates 4% of interest rates 5% of interest rates 6% of interest rates Source: BCB, Bradesco 20

21 PUBLIC DEBT / GDP PIB 2%, variando juros 2% GDP, varying real interest rates and 20-year cap on expenditure 3% of interest rates 4% of interest rates 5% of interest rates 6% of interest rates Base Source: BCB, Bradesco 21

22 Social Security Expenditure (%GDP) SOCIAL SECURITY AND DEMOGRAPHY As % of GDP; as % of elderly population Gasto com previdência e perfil demográfico Italy 14 Greece 12 Brazil Poland Finland Japan 10 Germany Luxembourg 8 Turkey 6 4 Chile United States 2 Mexico % of population over 60 years old Sources: UN, Bradesco 22

23 Can Brazil become investment grade again?

24 EXTERNAL INDICATORS 2017 Investment grade Speculative grade Sample mean AAA to A- mean BBB+ to BBBmean Speculative grade mean Brazil Total external debt / GDP 52% 67% 50% 45% 27% Net external liabilities / GDP 19% -11% 34% 55% 36% International Reserves (US$ bi) International Reserves (months of import) 8,6 8,0 8,2 9,1 30,0 Current account / GDP (*) -3,3% -1,5% -2,6% -4,2% -0,3% External financing needs / (Reserves + Exports) (**) 150% 197% 114% 132% 62% Sample from 70 countries * Mean of deficit countries ** Current account + Debt servicing maturing in 12 months Source: EIU, S&P, Bradesco 24

25 REAL vs FAIR VALUE Modelo DXY/CDS/TT, em R$/US$ 4,5 4,0 BRL Model DXY/CDS/TT 3,5 3,0 2,5 3,28 2,72 2,0 1,5 jan-12 jul-12 jan-13 ago-13 fev-14 ago-14 fev-15 ago-15 fev-16 ago-16 mar-17 set-17 Source: IBGE, Bradesco 25

26 FEDERAL DEBT INDICATORS 2017 Investment grade Speculative grade mean Sample mean AAA to A- mean BBB+ to BBBmean Speculative grade mean Brazil Interest expenses / Tax Revenues 9% 4% 7% 12% 18% Gross Debt / GDP 55% 50% 51% 60% 77% Net Debt / GDP 30% -300% 37% 51% 60% Source: S&P, Bradesco 26

27 7,0 6,5 6,0 5,5 REAL INTEREST RATE NTN-B, in % Juros Reais no Brasil (NTN-B) 5,0 4,5 4,0 3,5 12-year real interest rate 1-year real interest rate 5,00 3,0 2,94 2,5 mar-16 jun-16 set-16 dez-16 mar-17 jun-17 set-17 Source: Ambima, Bradesco 27

28 OUR FORECASTS Consumer inflation - IPCA (%) 6,3 3,0 3,9 GDP growth (%) -3,6 0,9 2,8 Industrial Production (%) -6,6 1,4 3,5 Retail Sales (%) -6,2 1,5 3,0 Unemployment Rate (% of labor force) 11,2 12,8 12,5 Outstanding Credit Growth (%) -3,0 1,0 5,0 Trade Balance (BCB, USD bn) 45,0 66,3 60,3 Current Account (USD bn) -23,5-7,2-27,7 Exchange Rate (BRL/USD, eop) 3,26 3,10 3,20 Selic (%, eop) 13,75 7,00 6,75 Primary Balance (BRL bn) -155,8-159,0-155,0 Gross Debt (% of GDP) 69,5 76,6 78,5 Source: Bradesco 28

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