Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook
Euler Hermes
Brazil
Turning the corner
Overview Growth accelerated in Q3 2012 as GDP increased by +0.6% q/q, less than expected, but ended four quarters of near stagnation. With the policy interest rate at a record low, expansionary policies are supportive of strengthening growth and a weaker exchange rate will help exports, though continued headwinds from the global economy may dampen prospects somewhat. Nonetheless, GDP growth is likely to accelerate in 2013 and 2014 to +3.3% and +3.8% in 2014, after only +1% in 2012. Brazil remains well placed systemically to withstand global economic strains.
Insolvencies in number of cases
10,000 20,000 30,000 40,000 50,000
0 9 9 9 9 9 0 0 0 0 0 1 1319753197531 Sources: Serasa, Euler Hermes forecasts
Household consumption growth remains robust. Personal consumption was +3.4% y/y in Q3, retail sales volume picked up in July-Sept and consumer confidence is stronger. Lower interest rates, along with credit growth, employ- ment and average earnings trends should support a moderate accelera- tion of personal consumption growth in 2013 and 2014.
Industrial production resumed growth in October and November manufactu- ring PMIs were stronger. Business confidence is strengthening. In Q3, however, fixed investment contracted -5.6% y/y, but improving confidence, robust consumption and a weaker exchange rate, should lead to an impro- vement in Q4, gathering pace in 2013 and 2014. Business insolvencies in 2012 have risen sharply by +32%, though from a low base, and are set to rise again in 2013 by +15%.
Exports of goods and services faltered in the middle quarters of 2012 and on an annual basis may contract margi- nally in 2012, but should return to growth in 2013-2014. Global head- winds will limit the improvement but exchange rate depreciation will help. Import growth is also likely to recover in 2013 and 2014 and the net export
contribution to overall growth will be negative. The nominal current account deficit will remain manageable in 2013 and 2014. As a major commodity expor- ting economy a key risk is the potential for prices to fall.
The policy interest rate has been lowe- red from 12.5% to 7.25% since August 2011, but easing was put on hold in November. Inflation (5.5% y/y November) is in the upper bound of the target range and with cuts already in place still to work through fully rates may remain on hold for some time. Lower interest rates helped offset the impact of a smaller primary fiscal surplus on the overall deficit in Jan-Oct. The government has also taken fiscal mea- sures to support growth, including tar- geted tax breaks, but the scope for expansion is limited by the need to keep the public debt/GDP ratio in check._DA
Trading partners USD billions: exports (FOB), imports (CIF)
12-months cumulative figures to end of Dec 2011 Country Total
of which, euro zone China USA
Argentina
Netherlands Japan
Country Total
of which, euro zone USA
China
Argentina Germany
Korea (South)
Exports Share of total 256 45 44 26 23 14 9
100% 17.7% 17.3% 10.1% 8.9% 5.3% 3.7%
Imports Share of total 249 42 38 36 19 17 11
Sources: IHS Global Insight, IMF Economic forecasts
Change over the period, unless otherwise indicated: * contribution to GDP growth ** BRL bn ***nominal public sector borrowing requirement
BRAZIL GDP
Consumer Spending Public Spending Investment Exports Imports
Net exports Current account
Current account (% of GDP) Inflation
General gov. balance**/*** ** *
1.0 2.9 3.2
forecasts
2011 2012 2013 2014 2.7 4.1 1.9 4.7 4.5 9.7
-3.4 -0.1 0.5
-0.8 -88 -2.1 6.5
General gov. balance (% of GDP) -2.6 Public debt (% of GDP) Nominal GDP
54 -0.1
3.3 3.8 3.6 3.2 4.5 4.5
4.0 3.0 6.0 6.0
8.0 11.0 -0.7 -0.9
-88 -136 -140 -0.2 5.4
-2.7 -2.7 5.5
5.3
-108 -124 -144 -152 -2.8 58
-3.0 -3.0 58
Sources: IHS Global Insight, National data, IMF, Euler Hermes forecasts
13 59 4,143 4,416 4,810 5,247
100% 16.9% 15.1% 14.5% 7.5% 6.7% 4.5%
Note pays structurelle
Country Risk Level BBLOW
13,585
13,369 13,172
20,285
33,827 33,938
14,144 11,876 9,795 4,606 3,203
2,825 3,684
2,990 2,800 3,570 4,250
14,081 26,556
20,167 20,941
32,605 49,241
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52