Economic Outlook BACC meeting August, 18 th 2020 Fernando Honorato - - PowerPoint PPT Presentation
Economic Outlook BACC meeting August, 18 th 2020 Fernando Honorato Barbosa Chief Economist Director DEPEC/Bradesco fernando.honorato@bradesco.com.br BACC 08/18/2020 CLASSIFIED This document has been classified by DEPEC and its access is
BACC meeting
Fernando Honorato Barbosa Chief Economist Director DEPEC/Bradesco fernando.honorato@bradesco.com.br August, 18th 2020
BACC
08/18/2020
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CLASSIFIED This document has been classified by DEPEC and its access is authorized exclusively to the participants of the BACC meeting.
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COVID-19
Deaths / mobility
Source: Google/mobility, Bloomberg
1-mar 29-mar 26-abr 24-mai 21-jun 19-jul 16-ago Brasil EUA Mundo (eixo da direita)
REAL INTEREST RATE
Swap pre deflated by IPCA expectation
Source: Bloomberg, Bradesco
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1% 3% 5% 7% 9% 11% 14 15 16 17 18 19 20
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CREDIT AND INDUSTRIAL PRODUCTION
Corporate credit stock and industrial production (YoY%)
Source: Bradesco, BCB – YoY
12.0% 13.1% 21.8% 24.8% 24.2% 22.4%
0.0% 10.0% 20.0% 30.0% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Corporate credit stock Industrial output
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Source: Bradesco, BCB, IBGE – YoY
16.7% 16.6% 15.5% 11.3% 9.0% 8.9% 2.0% 2.0% 0.4%
0.0% 5.0% 10.0% 15.0% 20.0% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Households credit stock Jobs
CREDIT AND JOBS
Credit for families and job creation (YoY%)
5,27 3,59 2,4 2,9 3,4 3,9 4,4 4,9 5,4 5,9 6,4 jan-95 jan-00 jan-05 jan-10 jan-15 jan-20
Source: Bloomberg, Bradesco
EFFECTIVE REAL EXCHANGE RATE BASKET
Last point = average current value
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EXPORTS AND IMPORTS
US$ millions, daily average
Source: MDIC, Bradesco
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0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Exports Imports
Source: IBGE, BCB, Bradesco
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1Q 894 5,8% 894 5,8% 894 5,8% 2Q 798
934 15,6% 934 15,6% 3Q 840
972 15,7% 972 15,7% 4Q 898 0,0% 900 0,3% 950 5,8% 2020 3.430 1,10% 3.700 9,1% 3.750 10,6% Labor Income before stimuli
(BRL billions)
YoY (%) Labor Income +
billions)
YoY (%) Actual scenario R$ 200 extension Labor Income + extension of
(BRL billions)
YoY
LABOR INCOME + GOVERNMENT TRANSFERS
Effect of transfers
Source: IBGE, Bradesco
RETAIL SALES
Level, in real terms
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65.0 70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 08 09 10 11 12 13 14 15 16 17 18 19 20 Retail Broad retail
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MANUFACTURING PMI INDEX
Level
Source: Bloomberg
51.0 40.4 33.0 36.0 39.0 42.0 45.0 48.0 51.0 54.0 57.0 60.0 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Brazil Mexico
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Source: IBGE, Bradesco
CONSUMPTION AND LABOR INCOME
Retail sales and labor income
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2.0% 7.0% 12.0% 17.0% 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Retail Sales (3m, YoY) Labor Income - MM3M
Growth + banking + credit = Improved labor market Consumption falls preventively (fear of losing job)
50,3% 34,0% 36,0% 38,0% 40,0% 42,0% 44,0% 46,0% 48,0% 50,0% 52,0% 13 14 15 16 17 18 19 20
“SAVINGS” PROXY
Monetary aggregate – M2
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Source: BCB, Bradesco. M2 = paper money + cash deposit + savings accounts + term deposits (CDB/LF)
EMPLOYMENT AND LABOR FORCE
Seasonally adjusted, in millions
Source: IBGE, Bradesco
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83,8 96,4 95 97 99 101 103 105 107 83,0 85,0 87,0 89,0 91,0 93,0 95,0 12 13 14 15 16 17 18 19 20 Employment (LHA) Labor Force (RHA)
UNEMPLOYMENT RATE
Actual and counterfactual – participation rate Feb/20
Source: IBGE, Bradesco
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19.3 12.5 5.0 7.0 9.0 11.0 13.0 15.0 17.0 19.0 21.0 12 13 14 15 16 17 18 19 20 Counterfactual Actual
FORMAL JOPB CREATION
Caged, seasonally adjusted
Source: CAGED, Bradesco
200 400 07 08 09 10 11 12 13 14 15 16 17 18 19 20
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GDP
% QoQ
Source: IBGE, Bradesco
0,4
6,8 1,2 0,7 0,7 0,7 0,7
0,0 2,0 4,0 6,0 8,0 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
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GROWTH OF GROSS PUBLIC DEBT
Increase between 2019-2020 (p.p. of GDP)
Source: EIU, Bradesco
28 27 26 26 25 23 22 2020 18 18 16 16 15 15 14 13 12 12 11 11 11 10 10 10 9 9 9 8 8 8 8 7 6 6 6 4 5 10 15 20 25 30 Singapore Italy Spain United Kingdom Japan France Portugal Brazil Greece Canada USA Germany South Africa Peru Saudi Arabia New Zealand Colombia Poland Norway Mexico Malaysia Chile Australia Hong Kong India Sweden Thailand Philippines Peru Switzerland Russia South Korea Argentina Hungary China Taiwan Indonesia
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GROSS PUBLIC DEBT
% of GDP
Source: EIU, Bradesco
252 197 162 154 140 12212111411297 9796 77 76 73 68 63 59 58 56 54 52 51 504946 4444 42 42 41 39 39 35 34 23 20 50 100 150 200 250 300 Japan Greece Italy Singapore Portugal Spain France Canada United Kingdom USA Argentina Brazil South Africa Germany Hungary Colombia Malaysia Mexico Poland India Hong Kong Norway Australia Thailand Philippines South Korea Saudi Arabia Sweden Peru New Zealand Indonesia Peru Chile Switzerland Taiwan China Russia
INCREASE OF TAX BURDEN
Estimates for the primary budget balance, R$ billion
Assumptions: extension of FUNDEB (fund for basic education) and there are no expenditure reforms. Taxation of dividends (20%), extinction of health and education deductions within income taxes, taxation of LCA/LCI (15%) and creation
Source: Bradesco, Tesouro Nacional
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50 2021 2022 2023 2024 2025 2026
Sem reformas Aumento de carga ex-CPMF Aumento de carga tributária manutenção do teto Without reforms Increasing tax burden Increasing tax burden (without CPMF) Maintaining the spending cap
Source: Bradesco, BCB
INCREASE OF PUBLIC DEBT
Gross Public Debt/GDP simulations
Flexible spending cap: Renda Brasil expenses and investments are excluded from the rule and grow by IPCA + 1%. Increase tax burden: taxing dividends, LCA/LCI, end of IRPF health and education deductions and CPMF creation.
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93 84 89 40 50 60 70 80 90 100 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Flex spending cap + 2 p.p. increase tax burden (GDP 2%). 2% Real Interest Rate Flex spending cap + 2 p.p. increase tax burden (GDP 3%). 2% Real Interest Rate Baseline (Reforms + Keep. Spend. Cap)
Source: Bloomberg, Bradesco
EXCHANGE RATE: BRL vs EMERGING MARKETS
Accumulated change in the BRL against the median and emerging percentiles
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4,41 5,48 3,5 3,8 4,1 4,4 4,7 5,0 5,3 5,6 5,9 jan/2019 jul/2019 jan/2020 jul/2020 75% 25% EM basket BRL
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5-YEAR CDS
Brazil x EMs (*)
Source: EIU, Bradesco (*) Mexico, S. Africa, Chile, China, Croatia, Hungary, Malaysia, Poland, Russia, Turkey, India, Thailand, Colombia, Indonesia, Peru
227 80 100 200 300 400 500 600 11 12 13 14 15 16 17 18 19 20 75% - 90% 50% - 75% 25% - 50% Brazil Median
FORWARD INTEREST RATES
% per year
Source: Anbima, Bloomberg, Bradesco
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6.74% 8.45% 3.39% 3.02% 8.69% 7.83% 9.42% 2% 3% 4% 5% 6% 7% 8% 9% 10% 2020 2021 2022 2023 2024 2025 - 2027 2027 - 2029 3-Aug 10-Aug 17-Aug
4.2 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 3-Aug 4-Aug 5-Aug 6-Aug 7-Aug 10-Aug 11-Aug 12-Aug 13-Aug 14-Aug
Average
7.12 6.20 6.30 6.40 6.50 6.60 6.70 6.80 6.90 7.00 7.10 7.20 3-Aug 4-Aug 5-Aug 6-Aug 7-Aug 10-Aug 11-Aug 12-Aug 13-Aug 14-Aug
Brazil
10-YEAR INTEREST RATES
In the past two weeks, %
Source: Bloomberg, Bradesco
Average: South Africa, Australia, Canada, Chile, India, Indonesia, Mexico, New Zealand, Peru and Russia
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Source: Bradesco
Bradesco economic forecasts are revised at the beginning of each month. During moments of greater volatility, the level of uncertainty and error margins naturally rise, especially between revisions. Our forecasts are based on the assumption that the adjustments necessary to ensure the sustainability of Brazil’s macroeconomic framework will be implemented over the next few years. If these adjustments do not materialize or are better than expected, the forecast could be altered significantly. Last updated on July, 28 2020
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OUR SCENARIO…
2017 2018 2019 2020 2021
GDP growth (%) 1,3 1,3 1,1
3,5 Consumer inflation - IPCA (%) 2,95 3,75 4,31 1,9 3,1 Wholesale inflation - IGP-M (%)
7,5 7,3 8,5 4,0 Selic Rate (%, eop) 7,00 6,50 4,50 2,00 3,00 Exchange Rate (BRL/USD, eop) 3,31 3,87 4,03 5,10 5,10 Industrial Production (%) 2,5 1,0
3,0 Retail Sales (%) 4,0 5,0 3,9
4,5 Job Creation (in thousands) 1899 966 1816
1904 Unemployment Rate (% of labor force, avg) 12,7 12,3 12,1 13,5 13,5 Outstanding Credit Growth (%)
5,1 6,5 5,0 7,6 Trade Balance (USD bn) 64,0 53,0 39,4 58,0 66,9 Current Account (USD bn)
Primary Balance (BRL bn)
Gross Debt (% of GDP) 74,1 76,5 75,8 96,0 96,7