View
0
Download
0
Category
Preview:
Citation preview
11
The Changing Nature and Geography of
Global Finance
Monetary Policy and challenges ahead: Brazil’s perspective
Fernanda NechioDeputy Governor for International Affairs and Corporate Risk Management
July 18, 2019
2
2
Overview
International context
Some risks have declined but others remain
Domestic outlook
Halt on economic recovery
Inflation under control
Comfortable international position
Challenging fiscal side
Accommodative monetary policy
Upcoming developments
Changes to legislation and regulatory framework
Microeconomic initiatives
33
International context
4
4
Global outlook remains challenging
Some risks dissipating
the normalization of interest rates in some advanced economies
developed world revising to more flexible monetary policies
Others remain
trade tensions
global economic slowdown
risk aversion towards emerging economies
5
Global growth slowdown
3,73,4
3,5
2,9
2,4
1,91,8
1,1
1,4
0,80,70,5
6,66,2
6,0
2,02,2
2,5
5,7 5,45,6
1,5
0,9
1,9
-1
1
2
3
4
5
6
7
8
181920 181920 181920 181920 181920 181920 181920 181920
World USA Euro Japan China Latam* Em. Asia Others
An
nu
al %
ch
ange
GDP Output Growth Projections
*LATAM ex Argentina and Venezuela Source: Bloomberg
-1
0
1
2
3
4
5
6
7
Q12016
Q2 Q3 Q4 Q12017
Q2 Q3 Q4 Q12018
Q2 Q3 Q4 Q12019
Q2 Q3 Q4 Q12020
Q2 Q3 Q4
Y/Y
(%)
Headline Inflation
Japan
USA
Euro
Projections
China
Latam*
6
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
USA Canada Australia UK Germany Japan
% p
.y.
6-month period Last value = Jul 10 01.01.2019Source: Bloomberg
Sovereign bonds (10-year yields)
Central banks revising monetary policies
7
World Trade Uncertainty Index
Ahir, Nicholas Bloom, Davide
Furceri (2019)
Elevated trade uncertainty
8
-1%
0%
1%
2%
3%
4%
5%
6%
Ja
n-1
3
Ma
y-1
3
Se
p-1
3
Ja
n-1
4
Ma
y-1
4
Se
p-1
4
Ja
n-1
5
Ma
y-1
5
Se
p-1
5
Ja
n-1
6
Ma
y-1
6
Se
p-1
6
Ja
n-1
7
Ma
y-1
7
Se
p-1
7
Ja
n-1
8
Ma
y-1
8
Se
p-1
8
Ja
n-1
9
Global Trade
Sources: CPB & IMF Oct WEO
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
0,5
USA China World
%,
Ch
an
ge
fro
m b
ase
line
Eletronics Other Manuf. Other Sectors Primary Services
Effects from a 25% Increase in Tariffs Affecting all US-
China Trade
World Real Value Added
Trade tensions affecting global growth
99
Domestic scenario
10
Halt on economic recovery
6
7
8
9
10
11
12
13
14
May
20
13
Au
g 2
013
No
v 2
013
Feb
201
4
May
20
14
Au
g 2
014
No
v 2
014
Feb
201
5
May
20
15
Au
g 2
015
No
v 2
015
Feb
201
6
May
20
16
Au
g 2
016
No
v 2
016
Feb
201
7
May
20
17
Au
g 2
017
No
v 2
017
Feb
201
8
May
20
18
Au
g 2
018
No
v 2
018
Feb
201
9
May
20
19
% o
fla
bo
r fo
rce
**last month of the quarterly moving average
11.9
Unemployment Rate (s.a.**)GDP and IBC-Br (%p.y.*)
-4,5
-4,1
-3,3
-2,0
-1,0
-0,1
1,11,3 1,4 1,4
1,1 0,9
-6
-5
-4
-3
-2
-1
0
1
2
3
4
Ap
r 1
6
Jun
16
Au
g 1
6
Oct
16
Dec
16
Feb
17
Ap
r 1
7
Jun
17
Au
g 1
7
Oct
17
Dec
17
Feb
18
Ap
r 1
8
Jun
18
Au
g 1
8
Oct
18
Dec
18
Feb
19
Ap
r 1
9IBC-Br GDP *average of last 12 months/average of previous 12 months
11
% p
.y.
Measures of underlying inflation running at appropriated levels (includingfor components sensitive to the business cycle and monetary policy)
8
6
43,5
4
5,5
4,5 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,50 4,25 4,00 3,75 3,50
8,94
5,97
7,67
12,53
9,30
7,60
5,69
3,14
4,46
5,90
4,31
5,916,50
5,84 5,916,40
10,67
6,29
2,95 3,75 3.803.91
3,75
0
2
4
6
8
10
12
14199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1**
202
2**
tolerance interval targets IPCA IPCA Expectations*
Inflation within target range
*Market-based median expectations (Focus Jul2019)
12
398.9
-68.9
11.0
-150
-100
-50
0
50
100
150
200
250
300
350
400
450
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
international reserves FX swap position repo lines + FX loan operations
US$
bill
ion
0,3
-0,8
-0,4
1,6
-0,2-0,3
-2,4
-2,8
-3,5
-3,9
-4,3
-3,8
-4,2
-1,6
0,7
1,71,5
1,2
0,0
-1,8-1,6
-3,6
-2,9
-3,4-3,2
-4,1
-3,0
-1,3
-0,4
-0,8-1,0
-120
-100
-80
-60
-40
-20
0
20
-5
-4
-3
-2
-1
0
1
2
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
*
current account/GDP(LHS) current account(RHS)
International reserves and FX swaps Current account
Comfortable international position
13
Public Debt
% o
fG
DP
54,7
78,7
56,8
25
35
45
55
65
75
85
Ma
r
20
12
Se
p
20
12
Ma
r
20
13
Se
p
20
13
Ma
r
20
14
Se
p
20
14
Ma
r
20
15
Se
p
20
15
Ma
r
20
16
Se
p
20
16
Ma
r
20
17
Se
p
20
17
Ma
r
20
18
Se
p
20
18
Ma
r
20
19
public sector net debt
general government gross debt
general government gross debt - international reserves
Challenging fiscal side
14
80
90
100
110
120
130
140
01/2
000
07/2
000
01/2
001
07/2
001
01/2
002
07/2
002
01/2
003
07/2
003
01/2
004
07/2
004
01/2
005
07/2
005
01/2
006
07/2
006
01/2
007
07/2
007
01/2
008
07/2
008
01/2
009
07/2
009
01/2
010
07/2
010
01/2
011
07/2
011
01/2
012
07/2
012
01/2
013
07/2
013
01/2
014
07/2
014
01/2
015
07/2
015
01/2
016
07/2
016
01/2
017
07/2
017
01/2
018
07/2
018
01/2
019
Uncertainty Moving average (6m)
Economic Uncertainty Index
Uncertainty remains elevated
15
6
7
8
9
10
11
12
13
14
15
Jun 2
013
Sep
2013
Dec
2013
Mar
2014
Jun 2
014
Sep
2014
Dec
2014
Mar
2015
Jun 2
015
Sep
2015
Dec
2015
Mar
2016
Jun 2
016
Sep
2016
Dec
2016
Mar
2017
Jun 2
017
Sep
2017
Dec
2017
Mar
2018
Jun 2
018
Sep
2018
Dec
2018
Mar
2019
Jun 2
019
6.5
% p
.y.
Selic Rate
Policy rate at historically low
1616
Upcoming developments
17
Inflation targeting
Fiscal consolidation
Exchange rate
flexibility
Strong prudential
policy
Intensive banking
supervision
International insertion (including Brazil’s convergence to the
OECD)
Central Bank autonomy
Bank resolution
Macroprudential policy coordination
FX modernization
- New laws & regulations- OECD Codes adherence
NEXT STEPS
Consistent policies toolkit
18
Costly pension system
Source: OECD, UN
19
Pension reform to improve fiscal position
Source: Ministério da Economia (Jul 2019)
Primary surplus (%GDP) Public debt (general government (%GDP)
With pension reform
Without pension reform
Realized
With pension reform
Without pension reform
Realized
20
Some key details on proposed legislation:
Governors and deputies under 4 year mandates
Staggered mandates decoupled from election cycle
Central Bank to attend Senate and special committee
hearings
Enhanced transparency and communication
Central bank autonomy
21
“Cadastro positivo”
Reforms to improve productivity (tax, trade openness)
Foreign exchange modernization
Enhancements to macroprudential and supervision measures
Greater international insertion
Microeconomic initiatives to foster growth
22
International scenario and uncertainty holding back recovery
Global growth slowdown and tighter credit conditions
Uncertainty regarding fiscal reforms postponing investment decisions
Some scope to withstand setbacks
Anchored inflation expectations
Exchange rate flexibility
Comfortable level of international reserves
Recovery to resume with decline in uncertainty and implementation of
reforms
Conclusion
2323
Thank you!
Fernanda Nechio
Deputy Governor for International Affairs and Corporate Risk Management
Recommended