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COUNTRY INSIGHTS

Exports and Economic Activity
BRAZIL ECONOMICS · Report · 17 Oct 2016

In our last Weekly Report, we warned that the latest economic activity indicators – especially for industry – suggest another contraction of GDP in the third quarter. This result is partly due to the weakening of exports, raising the suspicion that it is a consequence of the appreciation of the r...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 10 Oct 2016 · 1 response

The result of the municipal elections (mayors and council members) on October 2nd unquestionably defined a new outline of the political scenario in Brazil. If any doubts remained about the end of the PT’s cycle in power, the vote tallies laid them to rest. The economic recovery has been much s...

Caution About the Start of Recovery
BRAZIL ECONOMICS · Report · 10 Oct 2016

The most recent economic activity indicators were disappointing and make it probable that GDP will contract further in the third quarter this year. Apparently the recession will be a bit longer than was expected a few weeks ago, and the latest numbers strengthen the forecast that the monetary eas...

A Cooperative Game Between Fiscal and Monetary Policies
BRAZIL ECONOMICS · Report · 03 Oct 2016

The solution to Brazil’s fiscal crisis requires not only tough measures like approval of the Proposed Constitutional Amendment (PEC) to limit spending in real terms and the social security reform. Without a return of economic growth, there will be no revenue growth or a return to primary surpluse...

Signs of Falling Inflation and the Start of the Easing Cycle
BRAZIL ECONOMICS · Report · 26 Sep 2016

With a negative output gap wider than in any period of falling inflation, and with the unemployment rate extremely high, important disinflationary forces are in place. However, the strong inertia, which has likely grown in recent years, and the steep increase of agricultural prices, with reflecti...

The Indications from the Financial Stability Report
BRAZIL ECONOMICS · Report · 19 Sep 2016

​There are various signs that economic activity has bottomed out between the second and third quarters, but there are no signs that recovery will be brisk. The Central Bank’s Financial Stability Report for the first half of the year offers new evidence that the rebound will be slow. Households an...

New Projections: No Great Changes
BRAZIL ECONOMICS · Forecast · 12 Sep 2016

We assume the government will have reasonable success in winning approval of the proposed constitutional amendment (PEC) to cap the nominal adjustment of public spending at the previous year’s inflation, and sends to Congress a proposal for social security reform that establishes minimum retireme...

Exchange Rate, Risk and Monetary Policy Reaction
BRAZIL ECONOMICS · Report · 12 Sep 2016

Up to the early weeks of 2016 the quotations of Brazil’s CDS rose simultaneously with steep depreciation of the exchange rate. The exchange rate is an asset price, reacting strongly to expectations. For this reason, as the perceived chances of impeachment increased, the depreciation movement inve...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 05 Sep 2016

Now that the long impeachment process is over, it is beholden to President Michel Temer, freed from the constraints of interim status, to fulfill the promises made to those who supported him during that process and to burnish his biography as the person responsible for defining a new political cy...

The Start of Monetary Easing is Approaching
BRAZIL ECONOMICS · Report · 05 Sep 2016

The communiqué from the last COPOM meeting left the door – formerly shut – ajar to starting a monetary easing cycle. The committee conditioned that decision on: a) limited persistence of the food price shock (read “lower food prices”); b) deceleration of the components of the IPCA more sensitive ...

What Should be the Reaction to the Appreciating Exchange Rate?
BRAZIL ECONOMICS · Report · 01 Sep 2016

Even without growth of capital inflows, the real has been getting stronger, and that trend will likely accentuate with reaffirmation of the commitment to carry out the fiscal adjustment now that impeachment has been confirmed. The strengthening of the nominal exchange rate has been affecting the ...

End of the Recession and Outlook for the Current Accounts
BRAZIL ECONOMICS · Report · 29 Aug 2016

In 2014 the current account deficit reached US$ 104 billion, as of when it has been declining, to US$ 27.9 billion in the 12 months through July 2016. In the past two months, the annualized monthly deficits (seasonally adjusted) have been higher than those over the previous 12 months (Graph 1), i...

The Labor Market in the Country’s Regions
BRAZIL ECONOMICS · Report · 22 Aug 2016

The unemployment rate in Brazil reached 11.1% in the second quarter, with the South remaining with the lowest rate in the county, around 8%, while the Northeast standing with the highest rate, nearly 13% (Graph 1). The rise in unemployment is similar in all five regions of the country – about 4 p...

Inflation: When Will it Start to Fall More Intensely?
BRAZIL ECONOMICS · Report · 15 Aug 2016 · 4 responses

​With the Central Bank firmly indicating it will pursue the 4.5% target in 2017, the inflation expectations measured in the Focus survey for that year have declined steeply, and the downward effect on real inflation is enhanced by the large negative GDP gap. Why against this favorable backdrop is...

End of the Recession and Perspectives for Recovery
BRAZIL ECONOMICS · Report · 08 Aug 2016

If the end of a recession is defined as the moment when GDP stops contracting, then it is highly likely that the current recession will end in the third quarter this year, after completing 9 quarters. This is what our leading indicator portends, supported by the latest numbers on industrial produ...

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