Situación España 1T16 1 st QUARTER Situación 2016 • Españ Economic Outlook Brazil
Brazil Economic Outlook / 1 st Quarter 2016 The global economy will continue to grow, but more slowly and with more risks. Uncertainty about China remains and recovery in advanced economies will be fragile. Risks around the baseline scenario were behind increased market volatility in January and February. In addition, commodity prices suffered significant corrections The prospects for the Brazilian economy continue to worse. The crisis is still far from its end. A solution to Brazil’s fiscal problems seem to be far away and economic activity is poised to weaken, further, contributing to maintain political tensions alive. Moreover, the impeachment proceedings and corruption scandals will continue on the spotlight, keeping uncertainty very high, making more difficult a fiscal adjustment and therefore impacting negatively economic activity Activity will contract sharply again and inflation will remain above the target range in 2016. We expect GDP to fall 3.0% in 2016. Prospects for 2017 are less negative, as uncertainty should decline once the congress takes a decision on the impeachment of President Rousseff, and as terms of trade are expected to increase. Inflation should moderate gradually going forward after, however relatively high indexation, among other factors, will prevent it to converge to within the target range in 2016 Fiscal deterioration will likely persist in 2016 and 2017, as fiscal problems are expected to remain unaddressed. The BCB is expected to keep the Selic unchanged until the end of the year and then start an easing cycle in 2017. Even though maintaining inflation under control and adopting a fiscal adjustment seem to continue to be among the government’s main objectives, there is a risk that these goals are not properly prioritized, which would extend the crisis even longer Page 2
Brazil Economic Outlook / 1 st Quarter 2016 Global Global economy will continue to grow, but more slowly and with more risks Page 3
Brazil Economic Outlook / 1 st Quarter 2016 Financial stress increased significantly in emerging economies BBVA Financial stress index Financial stress increases again in 6.0 the last quarter. especially in 5.0 emerging economies 4.0 3.0 2.0 Capital flows rebalancing towards advanced economies 1.0 0.0 -1.0 -2.0 Market pressure on countries more Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 dependent on external financing and commodity exporters Developed markets Emerging markets Source: BBVA Research Page 4
Brazil Economic Outlook / 1 st Quarter 2016 How to read recent market volatility? Unlikely: Fed’s liftoff was already priced in by markets. If Is it a delayed response anything. markets now expect a more gradual pace of to Fed’s rate hike rate hikes going forward. Is global growth being Unlikely: recent hard data do not show significant revised down? changes from expected path. except in a few emerging economies. Probably: uncertainty about China (grwoth rebalancing and exchange rate policy) and fall in oil price could have Is a risk scenario now second-round effects (vulnerability of oil companies and more likely? oil-exporting countries) Page 5
Brazil Economic Outlook / 1 st Quarter 2016 Oil prices have adjusted driven by supply and demand factors (Box 1) Brent oil: (USD/b) Prices fell recently on: 120 1. Lower demand (weather) 110 2. Resilient supply (US shale. OPEC 100 reluctance to cut production quotas) Uncertainty about future demand (China) 90 and future OPEC behavior 80 70 Prices may adjust even further in 1H16 (OPEC. 60 Iran. resilient USshale) and doubts about 50 Chinese growth 40 30 Gradual rebound in 2H16 as non-OPEC supply 20 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 falls (lower investment. lower financing) Forecast Nov-15 Forecast Feb-16 Convergence to 60 USD/b as oil oversupply is reduced Source: BBVA Research and Bloomberg Page 6
Brazil Economic Outlook / 1 st Quarter 2016 Other commodities linked to the cycle have been affected, but not as strongly Copper: (USD/lb) Soybeans: (USD/tm) 4.0 650 600 3.5 550 3.0 500 450 2.5 400 2.0 350 300 1.5 Mar-12 Jul-12 Mar-13 Jul-13 Mar-14 Jul-14 Mar-15 Jul-15 Mar-16 Jul-16 Mar-17 Jul-17 Mar-18 Jul-18 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Forecast Nov-15 Forecast Feb-16 Forecast Nov-15 Forecast Feb-16 Source: BBVA Research and Bloomberg Source: BBVA Research and Bloomberg … whereas soybean prices. less affected by Copper prices dragged by concerns about global growth and the derivatives market… growth rebalancing in China have evolved as expected Page 7
Brazil Economic Outlook / 1 st Quarter 2016 China: deceleration as expected. but increased uncertainty China: GDP growth (%) Central scenario: gradual. controlled deceleration to 6% in 2016-2017. driven by lax 9 economic policies. including the exchange rate 7,7 8 7,4 6,9 7 6,2 5,8 … but there is significant uncertainty on: 6 1. Ability to successfully manage the transition 5 to lower and more balanced growth 4 2. Exchange-rate policy and incentives to capital outflows 3 2 1 More likely that doubts about exchange-rate 0 policy will vanish sooner than doubts about 2013 2014 2015 2016 2017 authorities’ ability to engineer a successful feb-16 Feb-16 nov-15 Nov-15 transition to lower growth Source: BBVA Research Page 8
Brazil Economic Outlook / 1 st Quarter 2016 US: growth around 2.5%. supported by consumption. US GDP growth (%) The positive effect on consumption from lower 3,0 oil prices offsets its negative effect on investment and the drag from dollar 2,5 2,5 2,4 2,4 2,5 appreciation 2,0 1,5 Growth momentum seems to have abated in 1,5 the last weeks 1,0 0,5 Fed will implement gradual rate hikes. conditional on incoming data on economic 0,0 activity and inflation. We expect two 25bp 2013 2014 2015 2016 2017 interest rate hikes during 2016 feb-16 Feb-16 nov-15 Nov-15 Source: BBVA Research. BEA Page 9
Brazil Economic Outlook / 1 st Quarter 2016 Global GDP will grow 3.2% in 2016. postponing recovery to 2017 Global GDP growth (%) Confidence indicators and the increase in 6 financial tensions point to moderate growth at the beginning of 2016 5 4 Subdued growth in 2016 (similar to 2015) is driven by weak demand in emerging 3 economies 2 1 Recovery in developed economies continues to be fragile 0 2013 2014 2015 2016 2017 Developed Emerging World Nov-15 forecast Source: BBVA Research Page 10
Brazil Economic Outlook / 1 st Quarter 2016 Brazil The crisis is still far from its end Page 11
Brazil Economic Outlook / 1 st Quarter 2016 The prospects for the Brazilian economy continue to worse. The ongoing crisis is still far from its end. Brazil’s crisis index * The effects of a less supportive external (based on web searches) environment are being exacerbated within 100 Brazil especially by the impact of the fiscal 90 deterioration 80 70 As a consequence, Brazil is now going through 60 an economic crisis, which has been fueling - 50 and being fueled by- a political crisis 40 30 As a solution to Brazil’s fiscal problems seem 20 to be far away, economic activity is set to 10 further weaken. Impeachment proceedings and 0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 corruption scandals will keep political tensions alive * Seasonally- adjusted index built on the interest about the term “ crise ” (crisis in Portuguese) in Brazil. Source: Google Trends and BBVA Research Page 12
Brazil Economic Outlook / 1 st Quarter 2016 GDP to contract 3.0% in 2016 after having contracted around 3.8% in 2015. Prospects for 2017 are less negative GDP and components A contraction of both private consumption and (%) fixed capital investment will be the main factors 9 behind the GDP decline this year, as in 2015 6 3 On the other hand, net external demand should 0 continue to contribute positively to activity -3 growth in 2016 -6 -9 Prospects for 2017 are less negative as -12 uncertainty should decline once the congress -15 takes a decision (whatever it is) about the GDP FBKF Private Public Cons Exp Imp impeachment Cons 2015 2016 2017 Source: IBGE and BBVA Research Page 13
Recommend
More recommend
