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Brazil 2004: Economic Outlook. The stability re-conquered: Defeating inflation through monetary policy Adjustment in the external sector Further effort needed on the fiscal front From stability to growth Slow growth of employment The challenge of reducing poverty Investment and growth - PowerPoint PPT Presentation
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Brazil 2004: Economic Outlook
The stability re-conquered: Defeating inflation through monetary policy Adjustment in the external sector Further effort needed on the fiscal front
From stability to growth Slow growth of employment The challenge of reducing poverty Investment and growth Initiatives to promote growth
Scenarios
The stability re-conquered
Monetary Policy and InflationCPI and core inflation
Annualized monthly rates (%)
Source: IBGE
4.97.6
-5
0
5
10
15
20
25
30
35
40
45
Jan-02
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
CPI inflation Core inflation - trimmed mean
Short-term interbank rates(Selic rates - % p.y.)
Monetary Policy and Inflation
Source: Banco Central do Brasil
26.5
18.0
16.2516
18
20
22
24
26
28
Sep
-01
Nov-0
1
Jan
-02
Mar-
02
May-0
2
Jul-
02
Sep
-02
Nov-0
2
Jan
-03
Mar-
03
May-0
3
Jul-
03
Sep
-03
Nov-0
3
Jan
-04
Mar-
04
Sucess of the external sector(US$ billion)Exports and Imports - (in twelve months)
Source: MDIC
40
45
50
55
60
65
70
75
jan/0
1
feb/0
1
may
/01
apr/0
1
may
/01
jun/0
1
jul/0
1
ago/0
1
sep/0
1
out/01
nov/01
dez/0
1
jan/0
2
feb/0
2
mar
/02
abr/0
2
may
/02
jun/0
2
jul/0
2
ago/0
2
sep/0
2
out/02
nov/02
dez/0
2
jan/0
3
feb/0
3
mar
/03
abr/0
3
may
/03
jun/0
3
jul/0
3
ago/0
3
sep/0
3
out/03
nov/03
dez/0
3
jan/0
4
feb/0
4-5
0
5
10
15
20
25
30
Exports Imports Surplus
Success in the external sector
Current account deficit and Foreign Direct Investment
Source: Brasilian Central Bank
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
jan
/96
may
/96
sep
/96
jan
/97
may
/97
sep
/97
jan
/98
may
/98
sep
/98
jan
/99
may
/99
sep
/99
jan
/00
may
/00
sep
/00
jan
/01
may
/01
sep
/01
jan
/02
may
/02
sep
/02
jan
/03
may
/03
sep
/03
jan
/04
US
$ b
illio
ns
Foreign Direct Investment
Current Account Deficit
2002-20031999-20011996-1999
feb/04: US$ 5.1 bi
2004
feb/04: US$ 10.5 bi
Embi+ Brazil and Embi+ excl. Brazil and Argentina
100
300
500
700
900
Jan-
01
Mar
-01
May
-01
Jul-0
1
Sep
-01
Nov
-01
Jan-
02
Mar
-02
May
-02
Jul-0
2
Sep
-02
Nov
-02
Jan-
03
Mar
-03
May
-03
Jul-0
3
Sep
-03
Nov
-03
Jan-
04
1000
1500
2000
2500Embi+ Brazil
Embi+ (-BR-AR)
bps
Sucess in the external sector
Central Bank Reserves (including purchases from Treasury)
(in US$ millions)
Source: Banco Central do Brasil and Itau Bank
Net Reserves
02-jan-04 49,145 17,218 20,374 26,000
30-jan-04 53,261 21,502 25,124 30,630
27-feb-04 52,960 21,212 24,818 30,193
24-mar-04 51,600 20,852 24,458 29,751
Including Treasury
purchases
Date Gross
Reserves According IMF
Excluding FMI
Sucess of the external sector Real Exchange Rate
(Trade weighted currency basket)
Source: Itau Bank
2.93
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
jan
/84
jan
/85
jan
/86
jan
/87
jan
/88
jan
/89
jan
/90
jan
/91
jan
/92
jan
/93
jan
/94
jan
/95
jan
/96
jan
/97
jan
/98
jan
/99
jan
/00
jan
/01
jan
/02
jan
/03
jan
/04
Período Collor-Itamar
Bandas Cambiais
Câmbio Flutuante
Plano Real
,
3.07
Primary SurplusAccumulated in 12 months - % of GDP
Source: Central Bank(-) deficit; (+) superavit
4.19
-2
-1
0
1
2
3
4
5
6
7
Jan-9
2
Jan-9
3
Jan-9
4
Jan-9
5
Jan-9
6
Jan-9
7
Jan-9
8
Jan-9
9
Jan-0
0
Jan-0
1
Jan-0
2
Jan-0
3
Jan-0
4
Nominal interest paymentAccumulated in 12 months - % of GDP
Source: Central BankProjection: Banco Itaú
8.98
6
7
8
9
10
11
Jan-
99
Apr
-99
Jul-9
9
Oct
-99
Jan-
00
Apr
-00
Jul-0
0
Oct
-00
Jan-
01
Apr
-01
Jul-0
1
Oct
-01
Jan-
02
Apr
-02
Jul-0
2
Oct
-02
Jan-
03
Apr
-03
Jul-0
3
Oct
-03
Jan-
04
Taxa de Juros Nominal para fev/04Hipóteses:Crescimento do PIB:3,5%Taxa Selic acumulada para o ano 2004: 15,40%
8,00%
Net Public Debt % of GDP
Source: Central Bank
58,18
20
25
30
35
40
45
50
55
60
65
Projected value: Hypothesis:GDP growth:3,5%Primary surplus:4,25%
56,20%
From stability to growth
Economic active population and employment have been growing
million inhabitants
2001 2002 Feb/02 Feb/03 Feb/04 Feb/03-Feb/04 change
Labor force 83.2 86.1 16,4 20,6 21,0 0,4
Employed 75,5 78,2 14,3 18,2 18,5 0,3
Formal workers 22,2 22,9 6,6 8,3 8,1 -0,2Informal workers 53,3 55,3 7,7 9,9 10,4 0,5
Unemployed 7,7 7,9 2,1 2,4 2,5 0,1
National Annual Survey PNAD (Brazil) Monthly Survey ( 6 major cities )
São Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Recife and Porto Alegre. Source: IBGE
Less people under poverty line but still the most demanding
challenge
0
10
20
30
40
50
60
1983 1993 2001
Population living under poverty line(income less than US$ 1 per day)
Source: IPEA
57.9 million
64.6 million inhabitants
64.4 million
% of total population
Higher rates of growth through higher savings of the public sector
% of GDP
Source: IBGE
-5
0
5
10
15
20
25
47/52 53/65 66/74 75/84 85/93 94/99
gross savings public savings private savings
external savings GDP
00/02
18.5
20.8
21.7
19.9
23.9
20.721.1
9.0
1,4
3,5
0,3
4,0
1.70,218.0
20.0
22.0
24.0
1968-80 1981-85 1986-89 1990-93 1994-1997 1998-02 2003e
0.0
3.5
7.0
10.5
Sustainable growth requires higher investment
% Investment/GDP
GDP growth
Initiatives to promote growth
• Social security reform
• New bankcrupcy law
• New rules to promote mortgage loans
• New regulatory framework for the electric power sector
• Reform of the processual code on the judicial system
Scenario
2003 2004 2005
GDP (% change) -0.2 4.1 3.9
CPI (IPCA % chg.) 9.3 6.1 4.9
Interest rate (Selic %p.y.) dec 16.5 14.75 12.25
R$/ US$ dec 2.92 3.01 3.16
Current account US$ billion 4.1 6.0as % of GDP 0.8 1.0
Trade balance US$ billion 24.8 30.0 25.0
Exports 73.1 86.0 87.0Imports 48.3 56.0 62.0
5.0
GDP (US$ billion) 528 550 571
0,9
Scenario
Further information:
Economic Consulting DepartmentTel: 55 11 5029 2650
economia@itau.com.br
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