Structural Primary Balance May 2017 The Economic Policy Secretariat - - PowerPoint PPT Presentation

MINISTRY OF FINANCE

The Economic Policy Secretariat (SPE) reports take into account public data, whose primary sources are autonomous institutions, from public and private sectors. The aim is to organize these data in order to promote a better understanding of the Brazilian economy. The content of this material is simply informative. It has neither a prospective intention nor delimits economic policy measures to be taken by the Ministry of Finance.

Structural Primary Balance

May 2017

2

Concept

Source: SPE

• The Structural Primary Balance is the
• ne consistent with trend GDP and

excludes:

– The cyclical effects (GDP and Commodities); – Non-recurrent fiscal operations.

• For

example, we cannot say that, structurally, the fiscal position:

– Worsens when the revenue falls due to a recession; – Improves when there is an one-off revenue.

• Therefore,

it guarantees a good perception about how much expansionary or contractionary is the discretionary action of the fiscal policy.

Fiscal Balance

Cyclical Component Non- recurrent

• perations

Structural Balance

3

Methodology

• International methodologies are adapted to the

Brazilian case, in four steps:

– Adjusting important groups of Tax Revenues (including State Tax on Goods and Services and Municipal Tax on Services) to the GDP cycle. – Adjusting the royalties revenues and special

• il

participation to the oil price cycle. – Identifying the main non-recurrent operations that affected the fiscal balance. – Decomposing the cyclical component of the federal revenues transferred to the States and Municipalities.

4

GDP Cycle and Trend

Source: SPE

• 6%
• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 90 100 110 120 130 140 150 160 170 180 Output Gap (% of Potential GDP) Fixed base Index - 1995 average =100 Output GAP Trend GDP GDP Projections

5

Cyclical Component of the Public Sector Primary Balance (% GDP)

Source: SPE

0.06%

• 0.58%

0.11%

• 0.09%
• 0.29%

0.23% 0.95%

• 1.60%
• 0.02%

0.45% 1.08% 1.31% 0.00%

• 1.34%
• 2.0%
• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5%

6

Non-Recurrent Fiscal Operations (% GDP)

Source: SPE

0.73% 0.03% 0.05% 0.03% 0.03% 0.08%

• 0.19%

0.88% 0.99% 0.46% 0.94% 0.70%

• 0.47%

1.11%

• 0.8%
• 0.3%

0.2% 0.7% 1.2%

7

Public Sector Conventional and Structural Primary Balance (% GDP)

Source: SPE

2.4% 3.8% 3.5% 3.8% 3.4% 2.9% 2.6% 2.7% 1.6% 2.0% 1.2%

• 0.3%
• 2.6%
• 1.4%
• 2.3%

3.2% 3.2% 3.7% 3.7% 3.2% 3.2% 3.3% 1.9% 2.6% 2.9% 2.2% 1.7%

• 0.6%
• 1.9%
• 2.5%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Structural Conventional

8

2.66% 1.65% 2.03% 1.18%

• 0.30%
• 2.58%
• 1.39%
• 2.26%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 2009 2010 2011 2012 2013 2014 2015 2016

Central Government States and Municipalities State-owned Companies Public Sector

Structural Primary Balance by entities (% GDP)

Source: SPE

+ 0.3%

• 2.5%

9

Public Sector Fiscal Impulse (p. p.)

Source: SPE

The fiscal impulse evaluates the impact of the fiscal policy by calculating the difference

• f the fiscal balance of two consecutive years: a fiscal balance decrease means a

expansionary impulse (+) while a fiscal balance increase indicates a contractionary impulse (-).

• 0.3
• 1.4

0.2

• 0.3

0.4 0.5 0.4

• 0.1

1.0

• 0.4

0.8 1.5 2.3

• 1.2

0.9

• 0.7

0.0

• 0.5
• 0.1

0.6

• 0.1
• 0.1

1.4

• 0.7
• 0.3

0.8 0.5 2.3 1.3 0.6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Structural Conventional

10

Entities’ contribution to the Fiscal Impulse (% GDP)

Source: SPE

• 0.1

1.0

• 0.4

0.8 1.5 2.3

• 1.2

0.9

• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 2009 2010 2011 2012 2013 2014 2015 2016

Central Government States and Municipalities State-owned Companies Public Sector +1.1 p.p.

• 0.1 p.p.
• 0.1 p.p.

11

Central Government Fiscal Impulse – 2016 Breakdown (p. p.)

Source: SPE

1.07 0.84 0.07 0.36 0.09

• 0.29

Impulse Social Security Benefits Social Assistance Unpaid commitments Liabilities with banks and multilaterals Remaining impulse

Mandatory Expenditure Payments of Liabilities

12

2017 Fiscal Impulse Projection (p. p.)

Source: SPE

• 0.49
• 0.58

0.04 0.04

Public Sector Central Government States and Municipalities State-owned Companies

13

2017 Fiscal Impulse Projection Breakdown (p. p.)

Source: SPE

• 0.58

0.26 0.01

• 0.85

Impulse Social Security Benefits Social Assistance Remaining impulse

Ministry of Finance

Further information can be found in the Economic Policy Secretariat website:

www.spe.fazenda.gov.br