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Transparency in Meeting the Primary Deficit Target
BRAZIL ECONOMICS · Report · 27 Mar 2017

With the economy still in recession, it will not be easy to cut spending and increase taxes. But both of these actions will be necessary in 2017 to meet the primary deficit target. The lower projection for GDP growth and the frustrating results of some non-recurring revenues have reduced the expe...

The GDP Gap and the Behavior of Potential GDP
BRAZIL ECONOMICS · Report · 20 Mar 2017

Why has inflation been falling? The explanation rests in the combination the power of monetary policy, whose effects can be belated, but will not fail to occur, and the large and persistent negative output gap. Not only is the unemployment rate now below the NAIRU (the rate that does not accelera...

Intense Monetary Easing and Gradual Resumption of Growth
BRAZIL ECONOMICS · Forecast · 13 Mar 2017 · 1 response

The recession is ending – GDP has almost stopped shrinking – and the steep drop in inflation has allowed an intense cycle of real interest rate easing. Although the outlook is for renewed growth, this will not happen immediately. Expansion in the first two quarters of 2017 will be small, leading ...

Why Do We Maintain Our 0.5% Projection for Growth in 2017?
BRAZIL ECONOMICS · Report · 13 Mar 2017

For some time now we’ve insisted that economic recovery this year will be slow, and in addition to this the GDP contraction in the fourth quarter of 2016 was greater than projected. With this, the negative carry-over to 2017 is slightly more than previously projected, reaching -1.1%. Were it not ...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 06 Mar 2017

As the contents of the plea bargains reached with Odebrecht executives become public, the political climate will become tenser, with possible reflections on Brazilian asset prices. These prices have behaved favorably so far, based mainly on the hypothesis that Temer will complete his term and tha...

Regional Labor Market
BRAZIL ECONOMICS · Report · 06 Mar 2017

The average unemployment rate has been rising, but with important regional differences, which we will discuss in this note. Since the later part of 2016, the growth of the unemployment rate in Brazil has been predominantly explained by the rise of the participation rate (more people looking f...

Inflation, Exchange Rate and Economic Activity
BRAZIL ECONOMICS · Report · 20 Feb 2017

Inflation has been falling steeply, as well as the 12-month projections. The negative GDP gap is belatedly producing its effects. In light of this, the Central Bank will continue lowering the SELIC rate, which we project to reach 9.5% at the end of 2017, and this will not be the end of the easing...

Caution Against Excessive Optimism Regarding Growth in 2017
BRAZIL ECONOMICS · Report · 20 Feb 2017

With the publication of the latest IBC-Br, the probability has increased that GDP contracted in the last quarter of 2016, with a decline for the year of around 3.5%. Although the economy should start to recover shortly, something more will have to occur for GDP to grow more than 0.5% in 2017. In ...

New Guidelines for Credit
BRAZIL ECONOMICS · Report · 13 Feb 2017

An important change has occurred in the government’s orientation regarding credit. Less emphasis is being given to the use of official banks, which was a marked characteristic of the economic policy in the period after the international crisis, and was intensified under the so-called “New Economi...

The Labor Market: Opposite Signs
BRAZIL ECONOMICS · Report · 13 Feb 2017

It is known that the labor market is one of the last to recover after the end of a recession. Therefore, the unemployment rate should continue to rise in the coming quarters, but some positive signs have started to appear. At the same time the jobless rate continues to climb steeply, wages have s...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 06 Feb 2017

As usually happens in times of crisis, in 2017 the political and economic scenarios will continue to be symbiotically intertwined. That interdependence is evident, for example, in the behavior of asset prices, which continue to be commanded by events that affect the joint probability of two hypot...

What Does Industrial Production Say About the Speed of Recovery?
BRAZIL ECONOMICS · Report · 06 Feb 2017

Brazil is nearing the end of the long and deep recession that began in the second quarter of 2014. In phases like this it is common for some sectors to start recovering while others are still contracting. This is one of the reasons to avoid making inferences about economic trends based on high-fr...

What Can be Expected Regarding the Behavior of Credit?
BRAZIL ECONOMICS · Report · 30 Jan 2017

Although further contraction of GDP in the first quarter cannot be discarded, there are already clear signs that the economy is ready to start a period of recovery. The continuity of the reforms and indications that the monetary easing will be intense have improved the risk perceptions and streng...

Inflation on a Steep Downward Path
BRAZIL ECONOMICS · Report · 23 Jan 2017

The most recent results show that, after all, there is nothing wrong with Brazilian inflation. In the second half of 2016, claims were frequently heard that Brazil suffered from a serious pathology – the strong inflation inertia – which kept prices rising steeply even during a long and deep reces...

How Perspectives Changed in 2017 in Relation to a Year Ago?
BRAZIL ECONOMICS · Report · 16 Jan 2017

At the start of 2016, inflation was higher than 10%; fear of “fiscal dominance” had raised the quotation of Brazil’s 10-year CDS above 600 basis points and caused the real to depreciate to R$4.00/US$; and the most optimistic GDP projections were for contraction between 3% and 4%. Now as 2017 gets...

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