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Challenges to economic growth in a global crisis scenario

Challenges to economic growth in a global crisis scenario. 2012 Brazil Summit – Brazilian-American Chamber of Commerce. New York, April 23 rd , 2012. Luciano Coutinho President. The Global Scenario in 2012-13. US. Signs of improvements, but recovery will be slow.

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Challenges to economic growth in a global crisis scenario

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  1. Challenges to economic growth in a global crisis scenario 2012 Brazil Summit – Brazilian-American Chamber of Commerce New York, April 23rd, 2012 Luciano Coutinho President

  2. The Global Scenario in 2012-13 US Signs of improvements, but recovery will be slow Central Bank warded off panic, but fundamental problems remain. Europe China Soft landing A scenario of slowdown in world growth: according to the IMF, growth will be at 3.5%. Europe’s growth will be below the world average, with some countries in recession.

  3. Purchasing Managers Index (PMI), selected countries In basis points* Source: Bloomberg Produced by: APE/BNDES * Values higher than 50 indicate growth Germany France Italy Manufacturing slowdown is a global challenge

  4. USA: Fifty months after the beginning of the recession, employment had not yet recovered Path of recovery of US employment following recessions since 1960 (t = 0 in the month immediately prior to the beginning of a recession) 4 Source: Bloomberg. Produced by APE/BNDES

  5. Europe European crisis is still a focus. Spanish bonds spiked recently. Bond Profitability over 10 years (in %) Updated 04/10/2012 Spain Portugal Source: Bloomberg.

  6. China 2011: Slight slowdown Chinese gov't expects growth of 7.5% in 2012 Source: Bloomberg. Elaborated by APE/BNDES

  7. Trends: relocated growth. Emerging countries lead global expansion Real variation of GDP (moving average - 4 years)* Advanced economies vs. Emerging economies Forecast Souce: FMI/WEO april/2012. 2012-2017: forecasts.

  8. Why can Brazilian economy achieve a sustainable growth?

  9. The Brazilian economy Growth is sustainable Social inclusion sustains dynamic domestic market; Robust banking system that is not exposed to problematic assets/countries; Investment leading GDP growth; • Several investment opportunities: • Oil & Gas, Infrastructure, Energy, PAC 2, Competitive sectors, 2014 World Cup, 2016 Olympic Games... The Brazilian government has room to maneuver; Challenge: To increase the competitiveness of industry/services/public sector.

  10. Growth sustainability GDP growth, in % per year Source: IBGE. Produced by: Ministry of Finance. *forecast

  11. Consumer IPCA Inflation Index (% MoM) Source: IBGE Produced by: Ministry of Finance Inflation slowing down

  12. Fiscal sustainability Public indebtedness is falling and public accounts are under control. Net Debt of the Consolidated Public Sector (% GDP) End of Fiscal Period The Finance Ministry expects to reach a nominal result close to zero in 2014.

  13. Unemployment falling Unemployment rate (%) August, 2003 February, 2012 Source: IBGE

  14. Workers’ salaries have risen Minimum Salary: Real Variation (Deflator- IPCA)(%) Average of 5.7% p. a. Source: Ministry of Labour and Employment, Central Bank

  15. Social sustainability Improved distribution of income Average growth of income between 2000 and 2008, in % p.a. BRICS: Inequality of income has fallen in Brazil Brazil India China Sth. Africa Russia

  16. Brazilian is now a middle class country Brazilian Population: Economic Classes (millions of people) Source: FGV Produced by: Ministry of Finance * Based on PNAD (IBGE) data

  17. Credit has the potential to expand Total Credit for Housing – in % of GDP Source: Brazil’s Central Bank

  18. Investment perspectives are firm Investment rate in % of GDP (GFFC/GDP) Source: IBGE. *Projections from the Finance Ministry

  19. Investment perspectives are firm Oil and Gas, as well as Infrastructure will lead investments over the coming years.

  20. In million tons of grains (cereals, legumes and oilseeds) Source: Conab/MAPA Produced by: Ministry of Finance New record of the brazilian crop in 2011

  21. PAC 2 and several investment challenges in the infrastructure sector US$/R$ = 1.75

  22. In US$ billion Source: Ministry of Sports and Ministry of Finance Investments: World Cup 2014 Stadiums Urban Mobility Ports and Airports Telecoms and Energy Health and Safety Hotels US$/R$ = 1.75

  23. Challenges to industrial sectorIndustry is facing strong competition Manufactures Goods Balance – US$ billion Source: MDIC Produced by: Ministry of Finance *12-month basis by February 2012

  24. Nominal Exchange Rate (R$/US$) Source: CMA Brasil Produced by: Ministry of Finance Evolution of exchange rate

  25. Tax reductions (payroll) Domestic production stimulus Foreign trade financing Barriers to unfair competition Incentives to Information Technology and communications sectors Credit for investment – PSI 4 Automotive Regime (2013-2017) Challenges to Industrial sectorRecent measures of “BRASIL MAIOR” Plan

  26. Some challenges must be overcome to sustain long-term growth Long-term Agenda Generate continuous opportunities for social ascension and to eradicate poverty; Increase the rate of domestic savings; • Diversify sources of long-term funding; Foster innovation and sustainability; Solid and growing investment in infrastructure; Training/education of the workforce to maintain significant gains in productivity; Improve competitiveness of Brazilian industry: reduce systemic costs

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