The BCB cut rates by 50 bps in July, and in our view signaled another cut of the same magnitude in September.
We reduced our growth forecasts for 2019 (to 0.8% from 1.0%) and 2020 (to 1.7% from 2.0%), incorporating a sharper deceleration in the global economy.
We lowered our growth forecasts for 2019 and 2020. We also expect Selic rate cuts ahead, conditional to the approval of the pension reform.
The communication from the Monetary Policy Committee’s (Copom), and the news flow on pension reform will play a key role
We reduced our GDP growth forecasts for 2018 (to 1.1% from 1.3%), 2019 (to 2.0% from 2.5%) and 2020 (to 2.7% from 3.0%)
We forecast a shrinking primary budget deficit, from 1.7% of GDP in 2018 to 1.3% in 2019 and 0.8% in 2020
After somewhat of a truce in July, international and domestic uncertainties hammered the BRL over the past month
Activity indicators suggest that underlying growth continues to lose steam despite normalization in industrial production in June
The continued deterioration of financial conditions led us to reduce our GDP growth forecasts to 1.3% in 2018 and 2.0% in 2019
We lowered our GDP growth forecasts to 1.7% in 2018 , due to tighter financial conditions and the impact of the truckers’ stoppage
The government approved several measures to end the truck driver’s strike, with negative fiscal impact
Lower GDP, higher BRL and inflation forecasts
Growing uncertainties for the political and macroeconomic scenario, both internal and external.
We revised our estimate for the exchange rate due to the decline in risk premia over the recent months.
We revised our estimate for the primary budget deficit in 2017 to 1.9% of GDP from 2.3%.
Pension reform back on the table, but there is still uncertainty regarding its approval
The date to end the easing cycle was left wide open.
Our forecast for the Selic rate in early 2018 was reduced to 6.5% from 7.0%
Tax hike is not enough to meet the primary result targets.
We reduced our inflation estimates to 3.3% from 3.7% in 2017, and to 4.0% from 4.1% in 2018.
A more turbulent political scene tends to delay reforms in Congress.
We expect approval of the Social Security reform in Congress by the end of 3Q17.
With lower, current and expected, inflation, the BCB has increased the pace of easing to 100bps.
Based on BCB recent communication, we now expect the Selic rate to reach 8.25% by the end of this year (down from 9.25%).
Anchored expectations and widespread disinflation create an opportunity to reduce the inflation target.
The central bank has increased the pace of interest rate cuts. We forecast the Selic rate at 9.75% in 2017 and 8.5% in 2018.
We reduced our growth forecast for 2016 and 2017. Fiscal reforms continue to move ahead, but political uncertainty increased.
We now expect a more depreciated exchange rata and a 25-bp rate cut in November, due to a more uncertain external scenario.
Approval of fiscal reforms is critical to pave the way for a monetary easing cycle and for a sustainable economic recovery.
We have revised our GDP growth forecast to 2.0% in 2017. However, this scenario depends fundamentally of the fiscal reforms.
Activity has been showing signs of a recovery. However, any recovery will be sustainable only if fiscal reforms are approved.
A stronger and sustainable economic recovery depends on the approval of fiscal reforms, especially on the expenditure side.
The recession continues, but recent data continues to improve. We now expect a smaller GDP contraction in 2016.
The chances of fresh efforts being made to push through fiscal reform and adjustments are increasing.
The outlook for Brazil is a binary one. If the country takes the path of reform, there would be room for an economic recovery.
The ongoing fiscal/political problems would maintain the economy under pressure and block the approval of reforms and other measures.
Economic activity has not yet stabilized. In our scenario of falling activity and inflation, we see the Selic rate ending 2016 at 12.75%.
Recession will persist in 2016. The depressed economic activity makes the fiscal adjustment even more challenging.
The political and economic uncertainty will probably continue in 2016.
Economic activity continues to decline. There are no signs of stabilization in production or demand.
There are no signs of a recovery in economic activity.
The scenario for Brazil has deteriorated, given the difficulties in the fiscal adjustment.
The scenario has proved more complex. We now forecast a longer recession and a weaker exchange rate.
Indicators suggest new decline in the economy during the third quarter. We’ve revised downwards our GDP forecast in 2015 and 2016.
Inflation has increased and growth has worsened in Brazil, making it harder to conduct monetary and fiscal policy.
We raised our forecast for the IPCA this year to 8.5% from 8.2% due to tax hikes and greater increases in some regulated prices.
The various macroeconomic adjustments continue to advance amid economic and political uncertainties.
We reduced our GDP forecast for 2015 to -0.5%. We raised our exchange rate forecast for 3.10 reais per U.S. dollar.
December data showed a deceleration in economic activity and a deterioration in the fiscal accounts.
Adjustments in fiscal policy and regulated prices will be deeper.
For a decade, the Brazilian economy benefited from favorable external and domestic conditions, which we no longer can rely on.
The need for macro adjustments will probably set the tone for economic policy in the coming months.
Recent data suggest a slow recovery in economic activity throughout 3Q14.
After weakness in 2Q14, the recovery in economic activity has been sluggish.
The consumer price index posted a near-zero reading in July, but the year-over-year rate remained at 6.5%.
Coincident indicators point to weaker activity in 2Q14.
We revised our GDP forecast for 2014 to 1.0%.
IPCA surprised on the downside in April.
Food and transportation costs boost inflation in March.
The government’s announcement of the first budget review for 2014 revealed a more realistic fiscal target and budget assumptions.
We have lowered our forecast for GDP growth in 2014 to 1.4% from 1.9%, and to 2.0% from 2.2% in 2015.
Global growth is set to be faster than had been expected, tending to favor Brazil’s economy.
Our estimates for GDP growth were reduced to 2.2% from 2.4% for 2013 and maintained at 1.9% for 2014.
The room for further fiscal and quasi-fiscal policy expansion has narrowed.
We have revised our forecast for the end of 2013 to 2.35 reais per dollar from 2.45.
GDP expansion in 2013 should be lower, despite the expectation of faster growth in 2Q13.
During the process of portfolio reallocations, the drop in the Brazilian currency was sharper than for its peers.
We reduced our growth forecasts to 2.4% in 2013 and 2.8% in 2014 (from 2.8% and 3.3%, respectively)
Recent decisions confirm the intention to promote a more accommodative fiscal stance (at least) in 2013.
We forecast a falling primary budget surplus and a widening current-account deficit
We lowered our forecasts for GDP growth to 3.0% from 3.2% in 2013 and to 3.5% from 4.0% in 2014. We raised our estimate for consumer inflation to 5.7%.
Intervention in the foreign-exchange market reveals that the economic policy goals and preferences may change, as could interest rates over the coming months.
We have reduced our forecasts for GDP growth to 0.9% from 1.5% in 2012 and to 3.2% from 4.0% in 2013.
A slower rebound in investment worsens the GDP growth outlook and Selic rate will likely remain low for a longer period.
We have lowered our forecast for the primary budget surplus to 2.6% of GDP, and revised our forecast for the exchange rate to 2.0 reais per dollar.
The economy is still adjusting to a less benign environment
With the Selic rate now on a firm path to a level at or close to 9%, the next relevant question is: Where will it go next year?
The economy remains weak. As interest rates fall and public spending picks up, growth will likely build up again and peak in the second half.
The economy has weakened, but a mix of low interest rates, more public spending, tax breaks and credit stimulus will rekindle growth in 2012