BRAZIL MACROECONOMIC OUTLOOK November, 2017 Economic Research Department

BRAZIL MACROECONOMIC OUTLOOK November, 2017 Economic Research Department

PRIMARY SURPLUS % of GDP 3.5% 2.5% 1.5% 2.4% 2.0% 2.1% 2.8% 1.2% 2.8% 2.1% 1.6% 1.4% 0.5% -0.5% -1.5% -0.3% -0.8% -2.5% -3.5% -1.9% -2.5% -2.4% -2.2% 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: BCB, Bradesco

CONFIDENCE INDEX ÍNDICE DE CONFIANÇA DO EMPRESÁRIO INDUSTRIAL (ICEI) - DADOS DESSAZONALIZADOS Industrial sector 70 65 60 55 50 50.7 45 40 35 30 05 06 07 08 09 10 11 12 13 14 15 16 17 Source: CNI, Bradesco

INVENTORIES LEVEL Título do Gráfico estoques invertidos Industrial sector, the higher the indicator, the higher the inventories 125 120 115 110 105 107.2 100 95 90 05 06 07 08 09 10 11 12 13 14 15 16 17 Historical average Source: CNI, Bradesco

CONSUMER CONFIDENCE INDEX ÍNDICE Fonte: FGV DE CONFIANÇA DO CONSUMIDOR (ICC) E SEUS COMPONENTES (DADOS Elaboração: Bradesco DESSAZONALIZADOS) Sep/2005 = 100 Setembro/2005=10 125 115 105 95 85 75 65 55 Confidence Current Situation Expectations 05 06 07 08 09 10 11 12 13 14 15 16 17 91.1 82.3 70.9 Source: FGV, Bradesco

PIB anual GDP Annual rate of change, % 10.0% 8.0% 7.5% 5.8% 6.1% 6.0% 5.1% 4.4% 3.1% 3.2% 4.0% 4.0% 4.0% 3.0% 2.0% 1.4% 1.1% 1.9% 0.5% 0.0% -0.1% -2.0% 0.9% 2.8% -4.0% -6.0% -3.8%-3.6% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

GDP - CONSUMPTION Renda real Annual rate of change, % 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 4.0% 0.8% 1.3% -0.5% 3.9% 4.4%5.3% 6.4%6.5% 4.5% 6.2% 4.8% 3.5%3.5% 2.3% 1.1% 2.0% -4.0% -6.0% -3.9% -4.2% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

RETAIL SALES PMC ampliada anual Annual rate of change, % 15.0% 10.0% 5.0% 3.1% 6.4% 13.6% 9.9% 6.8% 12.2% 6.6% 8.0% 3.6% 3.0% 4.0% 0.0% -5.0% -1.7% -10.0% -15.0% -8.6% -8.7% 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

REAL INCOMES Renda real Annual rate of change, % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.1% 4.1% 3.4% 3.3% 3.4% 3.3% 2.9% 4.4% 3.3% 1.1% 0.1% 2.3% 1.5% -1.0% -2.0% -3.0% -1.7% -2.3% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

UNEMPLOYMENT RATE Título do Gráfico Annual Average, % 14.0% 12.0% 11.3% 12.8% 12.5% 10.0% 8.0% 9.6% 8.7% 9.2% 9.9% 10.1% 9.8% 9.3% 9.8% 8.9% 8.0% 8.5% 8.2% 7.6% 7.3% 7.2% 6.8% 8.3% 6.0% 4.0% 2.0% 0.0% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

PAYROLL Salário Mínimo Number of formal Jobs, in thousands 2,500 2,000 1,500 1,000 500 0-500 -1,000-1,500-2,000 1,523.3 1,617.4 2,136.9 1,566.0 645.4 995.4 730.7 500.0 152.7-150.0-1,625.6-1,371.4 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: MTE, Bradesco

GDP - INVESTIMENTS Renda real Annual rate of change, % 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% 4.8% 1.3% -1.4% -4.0% 8.5% 2.0% 6.7% 12.0% -2.1% 17.9% 6.8% 0.8% 5.8% -4.2% -10.2% -13.9% -3.0% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 6.0% Source: IBGE, Bradesco

GDP - AGRICULTURAL Renda real Annual rate of change, % 16.0% 12.0% 11.0% 8.4% 6.0% 1.0% 2.0% 1.1% 4.6% 3.2% 5.8% 6.7% 5.6% 2.8% 3.6% 4.0% -4.0% -9.0% -3.7% -3.1% -6.6% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

GDP - Industrial Renda real Annual rate of change, % 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 10.2% 8.2% 6.2% 4.1% 4.1% 2.0% 2.0% 2.2% 3.2% 0.0% -0.7% -1.5% -4.7% -3.8% -6.3% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

GDP - SERVICES Renda real Annual rate of change, % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% 5.8% 5.8% 5.0% 3.7% 4.3% 4.8% 3.5% 2.9% 2.8% 2.1% 2.2% 1.0% 0.1% -2.7% -2.7% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

GDP - CONSTRUCTION Título do Gráfico Annual rate of change, % 15.0% 13.1% 10.0% 5.0% 9.2% 4.9% 7.0% 8.2% 3.2% 4.5% 4.0% 0.0% 0.3% -5.0% -10.0% -2.1% -2.1% -4.0% -5.2% -6.5% 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

DESPITE THE EXPECTED RECOVERY, IT WILL TAKE SOME YEARS TO COME BACK TO BRAZILIAN GDP PEAK LEVEL 185 175 165 Focus Bradesco 2017: 0.7% 0.9% 2018: 2.4% 2.8% 2019: 2.5% 3.0% 2020+: 2.5% 3.0% 155 Contraction since 2014: 11% 161.3 145 135 125 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Source: IBGE, Bradesco

CONSUMER PRICES INDEX IPCA Annual rate of change, % 14% 12.5% 12% 10% 9.3% 10.7% 8% 6% 4% 7.7% 7.6% 5.7% 3.1% 4.5% 5.9% 4.3% 5.9% 6.5% 5.8% 5.9% 6.4% 6.3% 3,0% 3.9% 2% 0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

Título do Gráfico MARKET EXPECTATION FOR IPCA 2017 Average, Annual rate of change, % 6.5 6 5.5 5 4.5 4 4.0 3.5 3 3.1 2.5 2017 2018 2 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Source: BCB, Bradesco

REGULATED PRICES IPCA ADMINISTRADOS ANUAL Annual rate of change, % 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 10.8% 15.3% 13.2% 10.2% 9.0% 6.2% 4.3% 4.7% 5.3% 3.3% 3.1% 3.7% 1.7% 1.5% 18.1% 6.8% 5.5% 4.8% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

DURABLE GOODS PRICES IPCA Título do Gráfico Annual rate of change, % 10% 8% 7.9% 8.9% 6% 4% 2% 0% -2% -4% -6% 4.5% 3.9% 3.6% 3.1% 3.0% 3.3% 0.9% 1.3% -1.8%0.0% 0.0% -1.9% -1.6% -1.0% -0.5% -3.5% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

SERVIÇOS ANUAL SERVICES PRICES IPCA Annual rate of change, % 12% 10% 8% 6% 4% 4.9% 5.5% 7.3% 6.7% 9.8% 8.7% 8.1% 8.0% 6.7% 5.7% 5.8% 8.3% 8.1% 6.5% 4.5% 4.0% 2% 0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

FOOD PRICES IPCA Alimentação Domicilio Annual rate of change, % 25% 20% 15% 10% 5% 0% -5% 21.6% 12.9% 12.4% 9.6% 10.7% 10.7% 10.0% 9.4% 6.7% 7.1% 5.4% 2.6% 0.6% 0.9% 4.5% -0.1% -3.2% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

NOMINAL INTEREST RATE Título do Gráfico Selic, Annual rate 30% 25% 20% 19.00% 25.00% 18.00% 15% 10% 5% 13.25% 13.75% 11.00% 7.25% 14.25% 13.75% 7.00% 6.75% 0% 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: IBGE, Bradesco

BRAZILIAN NOMINAL EXCHANGE RATE R$/US$ 4.3 4.1 3.9 3.7 3.5 3.3 3.26 3.1 2.9 2.7 2.5 Jan-15 Jul-15 Jan-16 Jun-16 Dec-16 May-17 Nov-17 Source: Bloomberg, Bradesco

Taxa de câmbio - R$ / US$ - Final BRAZILIAN NOMINAL EXCHANGE RATE R$/US$, end of period 4.5 3.90 4 3.53 3.5 3.26 3.10 3.20 3 2.89 2.65 2.66 2.5 2.32 2.34 2.34 2.34 2.14 1.96 2.04 2 1.77 1.74 1.88 1.67 1.5 1 0.5 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: Bloomberg, Bradesco

SELECTED CURRENCIES Accumulated variation in the last 12 months Turkey Argentina Japan New Zealand Philippines South Africa Indonesia Switzerland Vietnam Malaysia Brazil Pakistan Australia UAE Colombia Mexico Singapore China DXY Korea Índia Chile Hungary Taiwan Peru UK Canada Thailand Poland Russia Czech Republic 30.0% 25.0% 23.8% 20.0% 15.0% 10.0% 5.0% 5.8% 4.9% 2.5% 0.8% 0.2% 0.0% -5.0% -10.0% -1.0% -2.6% -3.6% -4.2% -5.3% -7.8% -15.0% Source: Bloomberg, Bradesco

EXCHANGE RATE R$/US$, DXY index Dólar em relação à cesta DXY. Fonte: Bloomberg. 105 100 3.9 95 90 94.64 3.26 3.3 2.7 85 DXY Real 80 2.1 Jan-15 Oct-15 Jun-16 Feb-17 Nov-17 Source: Bloomberg, Bradesco

5 YEARS CDS AND BRL R$/US$ 550.00 CDS_5 BRL 450.00 350.00 250.00 150.00 50.00 3.09 180.62 4.50 4.00 3.50 3.00 2.50 2.00 1.50-50.00 1.00 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Source: Bloomberg, Bradesco

OIL PRICES US$/barrel 70 65 60 55 50 45 40 35 30 WTI BRENT 61.1 54.8 25 Feb-15 Jun-15 Sep-15 Jan-16 May-16 Aug-16 Dec-16 Mar-17 Jul-17 Nov-17 Source: Bloomberg, Bradesco

IRON ORE PRICES FONTE: FMI ELABORAÇÃO US$/tonE (P) PROJEÇÃO: BRADESCO NÍVEL MÉDIO ANUAL DO MINÉRIO DE FERRO (PREÇO SPOT NO PORTO DE TIANJIN/CHINA, MINÉRIO COM 62% DE TEOR DE FERRO) - US$/TONELADA 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 167.79 146.72 128.53 135.36 96.84 79.99 61.57 33.45 28.11 36.63 12.45 12.99 12.68 13.82 16.39 55.6 58.9 73.0 65.0 0.00 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: Bloomberg, Bradesco

Título do Gráfico SOYBEAN PRICES US$/bushel 16 14 12 10 8 6 5.0 4.6 5.1 6.3 7.5 6.1 5.9 8.6 12.3 10.3 10.5 13.2 14.6 14.1 12.5 9.5 9.9 9.8 10.3 4 2 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: Bloomberg, Bradesco

BRAZILIAN CURRENT ACCOUNT US$ million, deficit as % of GDP 20,000 0-20,000-40,000-60,000-80,000-3.3% GDP -1.3% GDP -0.3% GDP -1.2% GDP -100,000-120,000-4.2% GDP 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: BCB, Bradesco

FOREIGN DIRECT INVESTMENT Título do Gráfico US$ billion 120 100 80 101.2 96.9 88.5 86.6 75.1 78.9 77.0 80.0 69.2 60 40 20 0 28.928.4 33.0 23.2 16.6 18.2 15.5 19.4 10.1 44.6 50.7 31.5 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: BCB, Bradesco

BRAZIL THAT BRAZILIANS AND FOREIGNERS NEED TO KNOW o 1st PRODUCER AND 1st EXPORTER SUGAR o 4th PRODUCER SHIPPING INDUSTRY o 1st PRODUCER AND 1st EXPORTER COFFEE o 4th PRODUCER PULP o 1st PRODUCER AND 1st EXPORTER ORANGE JUICE o 4th PRODUCER TRUCKS o 1st PRODUCER REGIONAL JETS o 4th CONSUMER MOBILE PHONES o 2nd PRODUCER AND 1st EXPORTER SOYBENS o 4th ROAD NETWORK EXTENSION o 2nd PRODUCER AND 1st EXPORTER CATTLE MEAT o 4th PRODUCER CLOTHING o 2nd PRODUCER AND 1st EXPORTER TOBACCO o 5th PRODUCER AND 4th EXPORTER COTTON o 2nd PRODUCER AND 1st EXPORTER ALCOHOL o 5th PRODUCER AND 7th EXPORTER ORNAMENT STONES o 2nd EXPORTER FOOD PRODUCTS o 5th PRODUCER TEXTILE o 2nd PRODUCER AND 2nd EXPORTER IRON ORE o 5th PRODUCER COCOA o 3rd PRODUCER AND 1st EXPORTER POULTRY MEAT o 5th PRODUCER CEMENT o 3rd PRODUCER AND 2nd EXPORTER CORN o 5th PRODUCER PAPER o 3rd ELETRIC POWER o 6th PRODUCER PHARMACEUTICAL o 3rd CONSUMER PERSONAL COMPUTER o 6th PRODUCER CHEMICAL o 3rd PRODUCER FRUITS o 7th CONSUMER MARKET o 3rd PRODUCER COMMERCIAL AIRCRAFT o 7th PRODUCER RICE o 3rd INTERNET USERS o 7th PRODUCER AND 4th EXPORTER SALES CARS o 3rd PRODUCER BUSES o 8th PRODUCER ALUMINIUM o 3rd PRODUCER FOOTWEAR o 9th PRODUCER STEEL o 3rd CONSUMER PERFUMES AND COSMETICS o 11th PRODUCER HONEY o 3rd PRODUCER BAUXITE o 13th PRODUCER OIL o 4th PRODUCER AND 4th EXPORTER PORK MEAT o 15th WIND ENERGY o 4th PRODUCER BEVERAGES o 15th PRODUCER WHEAT o 4th PRODUCER MILK o 4th PRODUCER CERAMICS COVERINGS

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