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Brazil 2004: Economic Outlook. The stability re-conquered: Defeating inflation through monetary policy Adjustment in the external sector Further effort needed on the fiscal front From stability to growth Slow growth of employment The challenge of reducing poverty Investment and growth

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Presentation Transcript
slide2
The stability re-conquered:
  • Defeating inflation through monetary policy
  • Adjustment in the external sector
  • Further effort needed on the fiscal front

From stability to growth

  • Slow growth of employment
  • The challenge of reducing poverty
  • Investment and growth
  • Initiatives to promote growth

Scenarios

monetary policy and inflation
Monetary Policy and Inflation

45

40

35

30

25

20

15

10

7.6

5

4.9

0

-5

Jul-03

Jul-02

Jun-03

Jun-02

Jan-04

Jan-03

Apr-03

Jan-02

Apr-02

Aug-03

Aug-02

Mar-04

Oct-02

Mar-03

Mar-02

Oct-03

Feb-04

Feb-03

Feb-02

Sep-02

Sep-03

May-03

May-02

Dec-02

Dec-03

Nov-02

Nov-03

CPI inflation

Core inflation - trimmed mean

CPI and core inflation

Annualized monthly rates (%)

Source: IBGE

slide5

28

26.5

26

24

22

20

18

18.0

16.25

16

Jul-02

Jul-03

Sep-01

Sep-02

Sep-03

Jan-02

Jan-03

Jan-04

Mar-04

Mar-02

Mar-03

May-02

May-03

Nov-01

Nov-02

Nov-03

Monetary Policy and Inflation

Short-term interbank rates

(Selic rates - % p.y.)

Source: Banco Central

do Brasil

sucess of the external sector us billion

75

30

Exports

Imports

Surplus

70

25

65

20

60

15

55

10

50

5

45

0

40

-5

jul/01

jul/02

jul/03

jan/01

feb/01

jun/01

jan/02

feb/02

jun/02

jan/03

feb/03

jun/03

jan/04

feb/04

out/01

abr/02

out/02

abr/03

out/03

sep/01

sep/02

sep/03

apr/01

dez/01

dez/02

dez/03

ago/01

ago/02

ago/03

may/01

nov/01

may/02

nov/02

may/03

nov/03

mar/02

mar/03

may/01

Sucess of the external sector(US$ billion)

Exports and Imports - (in twelve months)

Source: MDIC

success in the external sector

40.0

2002-2003

2004

1996-1999

1999-2001

35.0

30.0

25.0

feb/04: US$ 10.5 bi

20.0

US$ billions

15.0

10.0

5.0

Foreign Direct Investment

0.0

Current Account Deficit

-5.0

feb/04: US$ 5.1 bi

-10.0

jan/96

jan/97

jan/98

jan/99

jan/00

jan/01

jan/02

jan/03

jan/04

sep/98

sep/99

sep/00

sep/01

sep/03

sep/96

sep/97

sep/02

may/98

may/99

may/00

may/01

may/02

may/96

may/97

may/03

Source: Brasilian Central Bank

Success in the external sector

Current account deficit and Foreign Direct Investment

sucess in the external sector
Sucess in the external sector

Central Bank Reserves (including purchases from Treasury)

(in US$ millions)

Net Reserves

Gross

Including

Date

According

Excluding

Reserves

Treasury

IMF

FMI

purchases

02-jan-04

49,145

17,218

20,374

26,000

30-jan-04

53,261

21,502

25,124

30,630

27-feb-04

52,960

21,212

24,818

30,193

24-mar-04

51,600

20,852

24,458

29,751

Source: Banco Central do Brasil and Itau Bank

sucess of the external sector
Sucess of the external sector

Real Exchange Rate

(Trade weighted currency basket)

3.07

Source: Itau Bank

slide11

Primary Surplus

Accumulated in 12 months - % of GDP

Source: Central Bank

(-) deficit; (+) superavit

slide12

Nominal interest payment

Accumulated in 12 months - % of GDP

Source: Central Bank

Projection: Banco Itaú

slide13

Net Public Debt

% of GDP

Source: Central Bank

economic active population and employment have been growing
Economic active population and employment have been growing

National Annual Survey

PNAD (Brazil)

Monthly Survey ( 6 major cities )

Feb/03-

Feb/02

Feb/03

Feb/04

2001

2002

Feb/04

change

million inhabitants

Labor force

16,4

20,6

21,0

83.2

86.1

0,4

75,5

78,2

Employed

14,3

18,2

18,5

0,3

22,2

22,9

Formal workers

6,6

8,3

8,1

-0,2

53,3

55,3

Informal workers

7,7

9,9

10,4

0,5

7,7

7,9

Unemployed

2,1

2,4

2,5

0,1

São Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Recife and Porto Alegre. Source: IBGE

less people under poverty line but still the most demanding challenge
Less people under poverty line but still the most demanding challenge

Population living under poverty line

(income less than US$ 1 per day)

% of total population

64.6 million inhabitants

64.4 million

57.9 million

Source: IPEA

slide17

Higher rates of growth

through higher savings of the public sector

% of GDP

25

20

15

10

5

0

-5

00/02

47/52

53/65

66/74

75/84

85/93

94/99

gross savings

public savings

private savings

external savings

GDP

Source: IBGE

initiatives to promote growth
Initiatives to promote growth
  • Social security reform
  • New bankcrupcy law
  • New rules to promote mortgage loans
  • New regulatory framework for the electric power sector
  • Reform of the processual code on the judicial system
slide21

CPI (IPCA % chg.)

9.3

6.1

4.9

Interest rate (Selic %p.y.) dec

16.5

14.75

12.25

R$/ US$ dec

2.92

3.01

3.16

Current account US$ billion

4.1

6.0

as % of GDP

0.8

1.0

Trade balance US$ billion

24.8

30.0

25.0

Exports

73.1

86.0

87.0

Imports

48.3

56.0

62.0

Scenario

2003

2004

2005

GDP (% change)

-0.2

4.1

3.9

GDP (US$ billion)

550

528

571

5.0

0,9

slide22

Further information:

Economic Consulting Department

Tel: 55 11 5029 2650

economia@itau.com.br