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COUNTRY INSIGHTS

The Monetary Tightening Continues
BRAZIL ECONOMICS · Report · 15 Jun 2015

In the minutes of the last COPOM meeting, the Central Bank once again signaled that the cycle of raising the SELIC rate would continue. Although acknowledging the weakening of the labor market and deceleration of economic activity, concern over the strong inflation in recent months prompted the a...

Continuing With the Adjustment Despite the Costs
BRAZIL ECONOMICS · Report · 08 Jun 2015

Executive Summary There's no way to escape from the costs of the fiscal adjustment under way in Brazil. Besides sharp declines in industrial production and fixed capital investments, to name just two components of GDP, the unemployment rate is trending upward and real wages downward. The reces...

Monetary Tightening and Recession: What Does the Central Bank Want?
BRAZIL ECONOMICS · Report · 08 Jun 2015

At its last meeting, the COPOM decided to raise the SELIC rate by 50 basis points, to 13.75% a year. This decision was widely expected by the market, so it caused no surprise. But there was also an expectation of a change in the tone of the communiqué, indicating that the end of the tightening cy...

GDP in the First Quarter: the Recession is Deepening
BRAZIL ECONOMICS · Report · 01 Jun 2015

GDP in the first quarter of 2015 contracted by 0.2%, which was less than the consensus projections. Still, there are no reasons for optimism. On the demand side, after many years of steady growth, there was a sharp drop in household consumption, and on the supply side, besides the fall in GDP in ...

Perspectives for 2015: Recession and Political Costs
BRAZIL ECONOMICS · Forecast · 26 May 2015

Executive Summary The political costs of the fiscal adjustment and the measures to control inflation are being carried by a weakened government. The recession in 2015 and the outlook for very modest growth in 2016 have put the administration in the trap of having to undertake a more drastic fi...

More Signs of the Size of the Recession
BRAZIL ECONOMICS · Report · 25 May 2015

In announcing last week the spending cuts necessary for the fiscal adjustment, the government revealed that its revenue projections are based on a GDP contraction of 1.2% in 2015. This is the "consensus forecast" of the most recent Focus survey published by the Central Bank. But a comparison betw...

Fiscal Adjustment: Another Step, But Still Short of What’s Needed
BRAZIL ECONOMICS · Report · 25 May 2015

In the attempt to meet the fiscal surplus commitment for 2015, the government has recently announced budget contingencies – in reality cuts – adding to R$ 69.9 billion. These will affect all discretionary spending categories, mainly investments, with cuts of R$ 25.7 billion in the Growth Accelera...

How Far Will the Current Monetary Tightening Go?
BRAZIL ECONOMICS · Report · 18 May 2015

The market is reacting to the signals sent by the Central Bank and expects a continuing increase in the interest rate. Last week the yield curve indicated that the market expects the SELIC rate to be raised by 50 basis points at the next COPOM meeting, and that this would not be the last hike. Af...

Without an External Impulse, the Recession Will be Longer
BRAZIL ECONOMICS · Report · 18 May 2015

Executive Summary Brazil has entered a recession in which, because of the high inflation and the need for fiscal adjustment, the authorities cannot use counter-cyclical measures. And unlike the recession of 2008-2009, the country cannot count on an impulse from abroad either. With the apprecia...

The Stock Market and Economic Activity
BRAZIL ECONOMICS · Report · 11 May 2015

From the way things are going now, nobody doubts that the Brazilian economy is entering a recession period. The doubt (and worry) is over how deep and how long the downturn will be. Although the recession will not be as deep as that in 2008-2009, it will probably be a good deal more persistent. N...

Difficulties in Achieving the Primary Surplus Target
BRAZIL ECONOMICS · Report · 04 May 2015

In this note we summarize the fiscal result for the first quarter, and based on the Central Government’s accounts, discuss the difficulties in meeting the target of 1.2% of GDP. With full transparency and without any artifices, in March the Central Government attained a primary surplus of R$ 1...

Technical Note on Changes in the External Accounts
BRAZIL ECONOMICS · Report · 30 Apr 2015

The statistics on the balance of payments published by the Central Bank of Brazil are now reported according to the new Balance of Payments Manual of the International Monetary Fund (BPM6, replacing BPM5). The Central Bank’s notes with details of the changes can be found at this link (in Portugue...

Successes and Conflicts in Executing the Adjustment: What’s Next?
BRAZIL ECONOMICS · Report · 27 Apr 2015

Executive Summary Four months have passed since the start of President Rousseff’s second term, and the greatest hope is on Joaquim Levy’s capacity to reverse the unfavorable inherited situation. The fiscal adjustment is under way, and initial hopes were that its execution, along with a weaker ...

The Signs Sent by the Latest Data on New Consumer Lending
BRAZIL ECONOMICS · Report · 27 Apr 2015

With the economy in recession and unemployment rising, the natural expectation was that banks would be more conservative in extending new loans, with negative reflections on household consumption. However, the figures on new lending for the first quarter this year show expansion in relation to th...

Brazil and the World in IMF’s View
BRAZIL ECONOMICS · Report · 20 Apr 2015

Last week the IMF published the latest edition of its World Economic Outlook (WEO), containing new macroeconomic projections for various countries and economic blocs, along with trends for the coming years. The global economy should continue on its recent recovery path, albeit with much slower gr...

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