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COUNTRY INSIGHTS

Inflation: a Worrying Picture
BRAZIL ECONOMICS · Report · 11 Jan 2016

Inflation in 2015 reached 10.67%, more than 4 percentage points above the top of the target interval. The main problem, however, is not the past behavior of inflation, but rather the perspectives for 2016. First, inflation is extremely resistant to falling. Second, the present recession turns to ...

The Latest Economic Activity Indicators
BRAZIL ECONOMICS · Report · 21 Dec 2015

Last week two important indicators of economic activity were published: a) the IBC-Br, pointing to a further GDP contraction; and b) the real retail sales data (restricted sense, excluding cars and construction materials), which showed slight growth after eight straight months of decline. This la...

Growing Inflation and Imminent Elevation of the SELIC Rate
BRAZIL ECONOMICS · Report · 14 Dec 2015

Despite the strong contraction of economic activity, inflation shows no signs of waning. The growth of the IPCA for November was higher than all expectations, in particular the acceleration of the core rate and diffusion index. So even in face of a recession that already ranks as one of the longe...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 07 Dec 2015

The recession, which deepened further in the third quarter, should continue in the last three months of the year, bringing the GDP contraction for 2015 to 4%. Given political uncertainty at the current exceptional levels, which hampers any attempt to change the country’s ruinous fiscal situation,...

Fixed Capital Investments – Further Decline
BRAZIL ECONOMICS · Report · 07 Dec 2015

The worst news that came from the disclosure of the GDP data for the third quarter was the behavior of gross fixed capital formation. Measured at constant prices, the investment rate fell to 17.9% of GDP, below the level during the 2008 crisis (18.2%). In the monthly data, all GFCF components sho...

GDP in the Third Quarter
BRAZIL ECONOMICS · Report · 03 Dec 2015

Third-quarter GDP contracted 1.7% in relation to the previous quarter. The estimate for the year is a drop between 3.7% and 4%, and based on an estimate that GDP will fall by 1% in the fourth quarter, the carry-over to 2016 is -2%. The recession has lasted six quarters and the drop in GDP drop...

The Fiscal Disaster and Monetary Policy
BRAZIL ECONOMICS · Report · 30 Nov 2015

There is little hope of any improvement in the fiscal picture: the most recent numbers reveal that over the past 12 months, the central government has accumulated a recurring deficit of more than 1% of GDP; the recession continues to erode revenues; and there is no political support for approval ...

Change in the Monetary Policy Signal
BRAZIL ECONOMICS · Report · 30 Nov 2015

Although keeping the SELIC rate at 14.25% a year, the Central Bank signaled that it might return to a tightening cycle. At the last COPOM meeting, two directors voted for a hike of 0.5 percentage point, and the communiqué omitted the previous comment that the interest rate would be maintained “fo...

Inflation and Recession: The Central Bank Dilemma is Getting Worse
BRAZIL ECONOMICS · Report · 23 Nov 2015

The IPCA-15 for November rose 0.85%, taking the 12-month inflation rate to 10.28%. Part of this movement is due to administered prices (Graph 1), but along with the pressure exerted by service prices, the influence is also being felt of the weaker exchange rate, which has depreciated 40% since th...

Where is Consumption Headed
BRAZIL ECONOMICS · Report · 16 Nov 2015

Real retail sales declined again in September, meaning three straight quarters of contracting household consumption (Graph 1). More important than this, however, is the absence of any signs of reversal of this behavior.

Inflation – No Reason for Optimism
BRAZIL ECONOMICS · Report · 09 Nov 2015

In October the 12-month IPCA rose to almost 10%, a result not only explained by the substantial adjustment of some key administered prices. There are clear signs that the effects of the weaker exchange rate are starting to appear in consumer prices, and even with the deepening recession and risin...

Synthesis of the Brazilian Economy
BRAZIL ECONOMICS · Report · 04 Nov 2015

The grave and complicated political impasse between the executive and legislative branches has been charging a high price regarding the quality of fiscal policy, aggravating inflation and undermining business and consumer confidence and economic growth.

Recession and Strong External Adjustment
BRAZIL ECONOMICS · Forecast · 03 Nov 2015

In 2015 GDP will contract by 3.1% and another 2.7% in 2016. Negative quarterly growth rates should prevail until at least the middle of 2016, meaning the present recession will be one of the longest and deepest in the country’s history. The primary fiscal deficit will be 1.4% of GDP this year,...

A Strong External Adjustment
BRAZIL ECONOMICS · Report · 03 Nov 2015

Unlike in many past crises faced by Brazil, the current one does not involve a balance of payments problem. Contrary to the several past episodes, Brazil now has a high level of international reserves and is experiencing a substantial decline in its current account deficit. In past crises, such a...

The Crisis and the Conflict Between Fiscal and Monetary Policies
BRAZIL ECONOMICS · Report · 26 Oct 2015

Brazil is not experiencing a balance of payments crisis: the current account deficits have been shrinking sharply and the reserves are plentiful. What exists is interplay of fiscal and political crises. The government does not have the strength to achieve the fiscal adjustment necessary to curb t...

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