BRADESCO-APIMEC MACROECONOMIC OUTLOOK DECEMBER, 2015 FABIANA D ATRI Economic Research Departament- DEPEC 2
International outlook
INTERNATIONAL SCENARIO Comingtotheendofcommoditiescycle Chinese economy deceleration In the USA, gradual monetary policy normalization Dollar strengthening Reduced global crisis risks, despite moderate growth 4
6,0 5,0 4,8 4,6 4,0 3,9 3,8 3,9 3,9 4,1 3,4 3,4 3,6 3,33,4 3,0 2,8 2,5 2,6 2,32,3 2,32,2 2,0 1,0 0,8 0,0 5,4 4,8 2,5 3,0 4,1 5,2 4,9 5,5 5,7 4,2 3,4 3,3 3,4 3,1 3,03,1 0,0 3,3 5 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2008 2009 2010 2011 2012 2013 2014 2015 2016 2000 2001 2002 2003 2004 2005 2006 2007 2017 GLOBAL GDP GROWTH(%) 1980-2016 SOURCE: IMF, BRADESCO
ACCELERATING DEVELOPED COUNTRIES PHASE AND DESECELERATION OF THE EMERGING ECONOMIES USA: END OF THE CRISIS EUROPE: CRISIS ENTERING IN ITS THIRD PHASE CHINA NEW NORMAL 6
CHINA: ANNUAL GDP GROWTH(%) SOURCE: IMF, BRADESCO 7
EURO AREA: ANNUAL GDP GROWTH (%) SOURCE: IMF, BRADESCO 8
USA: ANNUAL GDP GROWTH(%) SOURCE: IMF, BRADESCO 9
10 83.22 80.61 84.45 82.63 79.19 81.31 79.39 80.48 79.09 80.82 84.23 86.69 89.33 92.37 94.76 100.33 96.55 99.49 93.14 97.39 98.03 93.33 96.41 93.93 100.17 97.60 77.0 82.0 87.0 92.0 97.0 102.0 08/03/13 05/04/13 03/05/13 31/05/13 28/06/13 26/07/13 23/08/13 20/09/13 18/10/13 15/11/13 13/12/13 10/01/14 07/02/14 07/03/14 04/04/14 02/05/14 30/05/14 27/06/14 25/07/14 22/08/14 19/09/14 17/10/14 14/11/14 12/12/14 09/01/15 06/02/15 06/03/15 03/04/15 01/05/15 29/05/15 26/06/15 24/07/15 21/08/15 18/09/15 16/10/15 13/11/15 11/12/15 DXY INDEX SOURCE: BLOOMBERG
MEDIOCRE PERFORMANCE OF THE GLOBAL TRADE (VARIATION IN THE LAST 12 MONTHS) 30.0% 20.50% 20.50% 20.72% 20.0% 10.0% 10.75% 3.48% 0.0% -0.78% -10.0% -4.88% -20.0% -23.56% -30.0% SOURCE: BLOOMBERG -8.52% 11 mar/15 set/01 mar/02 set/02 mar/03 set/03 mar/04 set/04 mar/05 set/05 mar/06 set/06 mar/07 set/07 mar/08 set/08 mar/09 set/09 mar/10 set/10 mar/11 set/11 mar/12 set/12 mar/13 set/13 mar/14 set/14 set/15
BRAZIL: MAIN PRODUCTS EXPORTED (%) -2015 36.2% 13.3% 7.5% 6.5% 3.3% 3.1% 2.9% 2.3% Soybean Iron Ore Crude oil Chicken Soybean meal Coffee Beans Beef Corn Tobacco in leaves Copper ores Pork Cotton Sugar unrefined Pulp Semi products: iron and steel Alloy iron Leather Gold Soybean: oil Airplanes Vehicles Aluminum Auto parts Flat Rolled Plastic Sugar refined Others SOURCE: MDIC 12 12
OIL PRICES, BRENT (US$/BARREL) SOURCE: IMF, BRADESCO 13
IRON ORE PRICES (US$/TON) SOURCE: IMF, BRADESCO 14
SOYBEANS PRICE (US$/BUSHEL) SOURCE: IMF, BRADESCO 15
Brazilian economy outlook
DOMESTIC OUTLOOK Current adjustment phase must be understood as part of rebalance cycle required for growth; Some progress happened, mainly linked to regulated prices and external accounts; Fiscal policy remains as the main challenge; Expected recession in 2015 and 2016 will lead to a significant inflation deceleration; Exchange rate performance remains linked to fiscal environment and CDS behavior. 17
18 CONFIDENCE INDEX INDUSTRIAL SECTOR 50.00 48.7 59.5 53.2 63.9 65.5 51.8 58.5 54.4 60.1 61.9 47.6 68.5 63.7 54.6 58.2 53.3 58.4 49.9 53.1 46.5 44.8 37.5 35.0 30 35 40 45 50 55 60 65 70 75 out/02 jan/03 abr/03 jul/03 out/03 jan/04 abr/04 jul/04 out/04 jan/05 abr/05 jul/05 out/05 jan/06 abr/06 jul/06 out/06 jan/07 abr/07 jul/07 out/07 jan/08 abr/08 jul/08 out/08 jan/09 abr/09 jul/09 out/09 jan/10 abr/10 jul/10 out/10 jan/11 abr/11 jul/11 out/11 jan/12 abr/12 jul/12 out/12 jan/13 abr/13 jul/13 out/13 jan/14 abr/14 jul/14 out/14 jan/15 abr/15 jul/15 out/15 Valor Neutro ICEI SOURCE: CNI
CONFIDENCE CONSUMER INDEX S e t/2 0 0 5 = 1 0 0 1 3 2 1 2 7 1 2 2 1 1 7 1 1 2 1 0 7 1 0 2 9 7 11 0.2 1 0 7.8 11 2.1 1 0 9.6 1 2 0.0 1 0 5.8 11 3.3 11 2.5 11 0.3 1 2 4.0 11 5.4 1 2 4.9 11 9.5 1 2 7.8 11 6.7 1 2 1.7 1 0 9.7 11 3.8 1 0 6.9 9 6.2 1 0 0 9 2 8 7 9 4.7 8 5.6 8 2 7 7 7 2 6 i/0 a m 6 /0 v o n 7 i/0 a m 7 /0 v o n 8 i/0 a m 8 /0 v o n 9 i/0 a m 9 /0 v o n 0 i/1 a m 0 /1 v o n 1 i/1 a m 1 /1 v o n 2 i/1 a m 2 /1 v o n 3 i/1 a m 3 /1 v o n 4 i/1 a m 4 /1 v o n 8 2.9 5 i/1 a m 7 5.7 7 6.7 5 /1 v o n SOURCE: FGV 19
CURRENT BRAZILIAN CHALLENGES (FISCAL POLICY, PETROBRAS, CONSTRUCTION COMPANIES, REFORMS) DO NOT JUSTIFY THE RECESSION MAGNITUDE THAT WE ARE FACING AT THIS MOMENT. 20
WITHOUT FISCAL ADJUSTMENT AND BUDGET GOVERNANCE THIS CRISIS WILL NOT COME TO AND END 21 21
PUBLIC BUDGET ESSENCIAL PROBLEM IS THE FACT THAT EXPENSES GROWTHS ABOVE THE GDP, INDEPENDENTLY TO ECONOMIC CYCLE (DEMOGRAPHIC, FOR EXAMPLE). SO, PART OF THE ADJUSTMENT REQUIRES REVENUES INCREASE. 22 22
3 FISCAL POSSIBLE OUTLOOKS 23
PRIMARY FISCAL ACCOUNTS (AS % OF GDP) WITH NEW MEASURES APPROVAL 0 5 % 0 4 % 0 3 % 0 2 % 3.7 % 3.2 % 3.2 % 3.3 % 1.9 % 2.6 % 2.9 % 2.2 % 1.8 % 0 1 % 0 0 % 0.1 % 0.5 % -0 1 % - 0.6 % - 0.8 % -0 2 % -0 3 % 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 * 2 0 1 6 * 2 0 1 7 * 2 0 1 8 * - 2.0 % SOURCE: BCB, BRADESCO 24
PRIMARY FISCAL ACCOUNTS (AS % OF GDP) WITHOUT NEW MEASURES APPROVAL SOURCE: BCB, BRADESCO 25
PRIMARY FISCAL ACCOUNTS (AS % OF GDP) GOVERNMENT TARGET SOURCE: BCB, BRADESCO 26
GROSS PUBLIC DEBT (AS % OF GDP) 95% 90% 85% 80% Dívida Bruta Basic scenario Optimistic scenario Pessimistic Scenario Cenário Base Cenário Otimista Cenário Pessimista 77% 83% 89% 79% 75% 70% 68% 74% 71% 77% 72% 71% 65% 68% 60% 55% 50% 45% 59% 55% 52% 53% 51% 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* SOURCE: BCB, BRADESCO 27
IS THERE ROOM FOR INFLATIONARY PRESSURES? 28
INFLATION: RELEVANT HORIZON FOR MONETARY POLICY MOVING TO 2017 29 29
CONSUMER PRICES INDEX (IPCA) ANNUAL VARIATION 1999-2018 SOURCE: IBGE, BRADESCO 30
CONSUMER PRICES INDEX (IPCA) NON REGULATED PRICES ANNUAL VARIATION 1999-2018 THE BIGGEST DECELERATION SINCE 2008 SOURCE: IBGE, BRADESCO 31
CONSUMER PRICES INDEX (IPCA) REGULATED PRICES ANNUAL VARIATION 1999-2018 SOURCE: IBGE, BRADESCO 32
MEDIAN MARKET EXPECTATION FOR THE IPCA IN 2016 % per year SOURCE: BC 33
INTEREST RATE: MARKET KEEPS BETTING IN A HIKE DURING THE FIRST QUARTER OF 2016 34
SELIC RATE BASIC SCENARIO END OF THE PERIOD 28,0 25,00 21,0 14,0 7,0 15,75 19,00 16,50 17,75 18,00 13,25 13,75 11,25 8,75 10,75 11,00 11,75 10,00 7,25 14,25 13,00 12,00 11,00 0,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* SOURCE: BCB, BRADESCO 35
SELIC RATE ALTERNATIVE SCENARIO END OF THE PERIOD 28,0 25,00 21,0 14,0 7,0 15,75 19,00 16,50 17,75 18,00 13,25 13,75 11,25 8,75 10,75 11,00 11,75 10,00 7,25 14,25 14,25 13,00 12,00 0,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* SOURCE: BCB, BRADESCO 36
EXCHANGE RATE: WE STILL BELIEVE THAT BRL PERFOMANCE DEPENDS ON CDS BEHAVIOR AND FISCAL POLICY OUTCOMES 37 37
EXCHANGE RATE - R$/US$ SOURCE: BLOOMBERG 38
CDS LEVEL SUGGESTED BY THE SOVEREIGN RATING 500 450 400 350 300 250 200 150 CDS REAL R$/US$ 150 2,99 200 3,14 250 3,29 300 3,45 350 3,61 400 3,73 450 3,90 500 4,04 550 4,25 600 4,40 Chile Malásia Peru África do Sul Colômbia Panamá Tailândia México Flilipinas Brasil antes Índia Itália Brasil agora RússiaCroácia Turquia Indonésia Bulgária Hungria 100 China Polônia Israel Espanha Rep. Tcheca 50 Bélgica Irlanda Grau Reino Unido Áustria França Japão especulativo Suécia Alemanha Holanda Noruega 0 AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB SOURCE: BLOOMBERG; S&P 39
SELECTED CURRENCIES VARIATION IN THE LAST 12 MONTHS SOURCE: BLOOMBERG, BRADESCO 40
306.4 151.5 533.3 479.4 41 11/09/14 11/12/14 11/03/15 11/06/15 11/09/15 11/12/15 11/03/16 11/06/16 11/09/16 11/12/16 CDS VS EXCHANGE RATE SIMULATION UPDATED: ATUALIZADO: December, 09/12/2015 9 th - 2015
CDS VS EXCHANGE RATE SIMULATION CDS REAL R$/US$ 150 2,99 200 3,14 250 3,26 300 3,43 350 3,61 400 3,80 450 4,01 500 4,20 550 4,41 600 4,63 SOURCE: BRADESCO 42
EXCHANGE RATE (POST STRESS SCENARIO) - R$/US$ 2000 2018 SOURCE: BLOOMBERG, BRADESCO 43
EXCHANGE RATE (ALTERNATIVE SCENARIO) - R$/US$ 2000 2018 SOURCE: BLOOMBERG, BRADESCO 44
TRADE BALANCE (US$ MILLION) SOURCE: MDIC, BRADESCO 45
CURRENT ACCOUNT US$ MILLION AND % OF GDP SOURCE: BCB, BRADESCO 46
FOREIGN DIRECT INVESTMENT (US$ MILLION) SOURCE: BCB, BRADESCO 47
BRADESCO NEW FORECASTS 48
BRAZILIAN GDP ANNUAL VARIATION SOURCE: IBGE, BRADESCO 49
BRAZILIAN GDP HOUSEHOLD CONSUMPTION ANNUAL VARIATION SOURCE: IBGE, BRADESCO 50
BRAZILIAN GDP INVESTMENT ANNUAL VARIATION SOURCE: IBGE, BRADESCO 51
BRAZILIAN GDP AGRICULTURE ANNUAL VARIATION SOURCE: IBGE, BRADESCO 52
BRAZILIAN GDP INDUSTRY ANNUAL VARIATION SOURCE: IBGE, BRADESCO 53
BRAZILIAN GDP SERVICES ANNUAL VARIATION SOURCE: IBGE, BRADESCO 54
BRAZILIAN GDP CONSTRUCTION ANNUAL VARIATION SOURCE: IBGE, BRADESCO 55
PAYROLL JOBS CREATION IN FORMAL MARKET (IN THOUSAND) SOURCE: MTE, BRADESCO 56
UNEMPLOYMENT RATE (ANNUAL AVERAGE) SOURCE: IBGE, BRADESCO 57
HOUSEHOLD INCOME ANNUAL VARIATION IN REAL TERMS SOURCE: IBGE, BRADESCO 58
RECOVERY DRIVERS Exports rebounding, that will respond to Real depreciation and economy opening process; Imports dropping, due to Real weakening; Infrastructure investments: a significant number of concessions may materialize; Privatization rebound will help bringing back national and global private sector; Household consumption will recover just after a long deleverage process; Inflation deceleration, from 10% to 5% annual increase, will help reducing pessimism; Some wage growth accommodation, will tend to reduce costs pressure; High diversification in Brazilian economy implies a spread reaction when correct signs come back. 59
NECESSARY AGENDA TO INCREASE POTENTIAL GDP GROWTH FISCAL GOVERNANCE AND EXPENDITURE EFFICIENCY INCREASE THE EFFECTIVENESS OF MONETARY POLICY PRODUCTIVITY (DOING BUSINESS, TAX REFORM, LABOR REFORM, EDUCATION, TRADE OPENNESS) INFRASTRUCTURE 60
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