Brazil Economic Weekly

Transcription

1 Macroeconomic Research Department Macroeconomic Research Department Brazil Economic Weekly April 30 th 2015 Support of credit growth in March was largely due to the effect of the currency depreciation Ellen Regina Steter The credit stock within the Brazilian financial system expanded by 11.2% over 12 months to R$ 3.1 trillion in March this year and was equivalent to 54.8% of GDP. The growth was driven mainly by earmarked lines as around 75% of the increase registered over 12 months was due to these types of loan. As a result, the earmarked loan portfolio accounted for 48.4% of the total credit stock. This change in the performance of the earmarked loan lines was stimulated to a great extent at the beginning by lines from the national development bank, the BNDES, and then reinforced by home loans, especially from 2010 on. The apparent imbalance between economic activity and the expansion rate of credit has not been due to a steady demand for loans. In fact, the exact opposite is the case and demand remains weak. The fact is that a large part of the ongoing growth was caused by the currency depreciation, particularly over the last two months. As some credit lines are indexed to foreign currency, the amount of debt to maturity of these lines obviously ends up rising whenever the Real loses value. The significant share of BNDES lines in the total portfolio means that those lines indexed to foreign currency end up having a heavy bearing on the final result. Therefore, if we exclude the effect of the currency depreciation in the BNDES portfolio, the monthly growth of the total credit stock is occurring at a more moderate rate than last year. The expansion of 0.9% seen in March would slip to 0.7% in seasonally-adjusted terms and is more in line with the expected retraction of GDP this year. In this situation, we reinforce our expectation that the credit stock will rise by 9.0% in 2015 compared with 11.3% in BRAZIL ECONOMIC WEEKLY Despite last year's weak performance and lower commodity prices, we expect the Chilean economy to recover in 2015 Thomas Henrique Schreurs Pires Chile's GDP growth slackened significantly in 2014, with a steep fall in investments and weaker private consumption, combined with inflation that was above the target and a strong currency depreciation. The cooling of the world economy, along with China's new growth model, which has been brought about by the slower expansion and less dependence on investments in the real estate sector and infrastructure than in the previous decade, interrupted the upward cycle of commodity price. Faced with this international situation, the Chilean economy has been hit badly by the high level of openness of the country's market and the heavy weighting commodities represent among its main exports. The activity indicators released until the beginning of 2015 suggested that the economy had left the worst period behind. Moreover, there was an upturn in copper prices and the confidence indices started rising once again. This improvement fueled expectations that domestic consumption would expand, as would investments, leading the economy to grow at a rate close to 3% in 2015, with inflation within the target, a healthy fiscal situation and the current account deficit close to zero. However, the recent political setbacks, involving corruption scandals, could put this move towards a recovery in business confidence into reverse and, in turn, bring lower investments, which would rein in the country's GDP growth. 1

2 Support of credit growth in March was largely due to the effect of the currency depreciation Ellen Regina Steter The credit stock within the Brazilian financial system expanded by 11.2% over 12 months to R$ 3.1 trillion in March this year and was equivalent to 54.8% of GDP. The growth was driven mainly by earmarked lines¹ as around 75% of the increase registered over 12 months was due to these types of loan. As a result, the earmarked loan portfolio accounted for 48.4% of the total credit stock. This change in the performance of the earmarked loan lines was stimulated to a great extent at the beginning by lines from the national development bank, the BNDES, and then reinforced Dados dessazonalizados by home loans, Fonte: BCB especially from 2010 on. Crescimento mensal do estoque total de crédito do Sistema Financeiro Nacional - We have noted in recent months that both the profiles of the kinds of credit and the growth rate have remained virtually constant. The stock of credit increased by 0.9% in March, the exact same rate seen in the first two-month period of this year and the monthly average in As a result, although economic activity has slowed even further, the growth of credit, albeit moderate, has remained stable. This imbalance does not look sustainable and indicates that we should see a further slackening in the growth of credit in the coming months. The following graph shows the stability in the expansion of credit growth within the national financial system. 2,0% 1,5% 1,4% 1,7% 1,5% 1,5% 1,4% 1,2% 1,1% 1,2% 1,1% 1,4% 0,8% 1,3% 0,9% 0,9% 0,9% Monthly growth of the total credit stock of the National Financial System in seasonally-adjusted terms 0,5% 0,6% 0,3% 0,0% Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Domestic Outlook It is worth making the point that this apparent imbalance between economic activity and the expansion rate of credit has not been due to a steady demand for loans. In fact, the exact opposite is the case and demand remains weak. The fact is that a large part of the ongoing growth was caused by the currency depreciation, particularly over the last two months. As some credit lines are indexed to foreign currency, e.g. specific kinds of BNDES lines, advances on export contracts, known as ACCs, export and import loans, the amount of debt to maturity of these lines obviously ends up rising whenever the Real loses value. The significant share of BNDES lines in the total portfolio means that those lines indexed to foreign currency end up having a heavy bearing on the final result. To give one example of this movement, the BNDES portfolio in March grew by 2.2% over February. This was a sharp pickup in the expansion rate considering that average monthly growth over the last six months was around 1.5% in seasonally-adjusted terms. However, according to the Central Bank, when we exclude the effect of the currency depreciation on the BNDES portfolio, growth would have come to only 0.8% in the month, a rate that is more compatible with a slowdown in its disbursements in line with the ongoing fiscal adjustment. 1 Loans with certain conditions attached, basically for agriculture and housing or some area subsidized by the government, in the case of the BNDES lines. 2

3 In fact, the performance of the loans granted by the BNDES confirms that the earmarked loans portfolio expanded at a more moderate rate. The BNDES released R$ 46.2 billion in the first quarter of last year whereas this volume slumped by 33.7% in the same period of this year to $ 30.6 billion. Therefore, although the performance of the stock indicates growth, the trend of the BNDES portfolio points to a cooling. When we split Fonte: the BCB BNDES loans by their final destination, we see that the line that was most affected was for financing Concessão total do BNDES acumulada no trimestre (em R$ milhões) - dados nominais investments which accounts for around 90% of the disbursements. This kind of loan fell by 35% between January and March of this year on an interannual comparison. This reinforces our view that investments in the Brazilian economy will shrink by 8% this year. As for the final takers of these loans, it is worth noting the more modest slowdown that occurred in disbursements in agribusiness loans which declined by only 5%. As we have highlighted previously, this sector has benefitted from successive record harvests Total loans granted by the BNDES in accumulated terms in the quarter (R$ million) nominal figures Fonte: BCB Concessão do BNDES para capital de giro acumulada no trimestre (em R$ milhões) - dados nominais 1o.tri/12 1o.tri/13 1o.tri/14 1o.tri/15 Loans granted by the BNDES for working capital in accumulated terms in the quarter (R$ million) nominal figures Fonte: BCB Concessão do BNDES para financiamento de investimentos, acumulada no trimestre (em R$ milhões) - dados nominais 0 1o.tri/12 1o.tri/13 1o.tri/14 1o.tri/ Domestic Outlook o.tri/12 1o.tri/13 1o.tri/14 1o.tri/15 Loans granted by the BNDES for investments in accumulated terms in the quarter (R$ million) nominal figures 3

4 Fonte: BCB Concessão do BNDES para financiamento agroindustriais, acumulada no trimestre (em R$ milhões) - dados nominais Loans granted by BNDES for agribusiness in accumulated terms in the quarter (R$ million) - nominal figures o.tri/12 1o.tri/13 1o.tri/14 1o.tri/15 Therefore, if we exclude the effect of the currency depreciation in the BNDES portfolio, the monthly growth of the total credit stock is occurring at a more moderate rate than last year. The expansion of 0.9% seen in March would slip to 0.7% NOMINAIS) in seasonallyadjusted terms and is more in line with the expected CRESCIMENTO EM DOZE MESES DA CARTEIRA DE total de CRÉDITO (DADOS retraction of GDP this year. In this situation, we reinforce our expectation that the credit stock will rise by 9.0% in 2015 compared with 11.3% in However, it is worth mentioning that this projection Fonte: Bacen assumes average monthly growth of 0.7% which is less than last year's average of 0.9%. 36,0% 34,2% 32,0% 31,3% 31,7% 28,0% Growth over 12 months of the total credit portfolio (nominal figures) 24,0% 20,0% 16,0% 12,0% 8,0% 20,0% 14,6% 19,8% 2 18,2% 17,2% 15,9% 16,1% 14,5% 11,3% 9,0% Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Domestic Outlook Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 4

5 Despite last year's weak performance and lower commodity prices, we expect the Chilean economy to recover in 2015 Thomas Henrique Schreurs Pires Chile's GDP growth slackened significantly in 2014, with a steep fall in investments and weaker private consumption, combined with inflation that was above the target and a strong currency depreciation. For a better understanding of the Chilean economy's performance last year, we need to take into account the new setting for global growth and demand for commodities. The cooling of the world economy in recent years, along with China's Crescimento new interanual growth do Chile x América model, Latina* Fonte: Bloomber; CEIC; FMI which has been brought about by the slower expansion and less dependence on investments in the real estate (*) principais países da América Latina: Argentina, Brasil, Chile, Colômbia, México e Peru sector and infrastructure than in the previous decade, interrupted the upward cycle of commodity price. This lower demand for commodities and subsequent fall in prices has led Latin America's growth to lose most of its drive in recent years, declining from an average expansion of 3.9% between 2003 and 2011 to 2.4% over the last three years. Faced with this international situation, the Chilean economy has been hit badly by the high level of openness of the country's market and the heavy weighting commodities represent among its main exports. 1 9,0% 7,0% 5,0% 4,2% 9,3% 6,8% 6,2% 4,8% 5,9% 8,0% 9,6% Chile Latin America 5,8% 4,8% Chile's interannual growth versus Latin America 3,0% - 3,7% 2,5% 3,3% 2,3% 0,5% 1,8% (*) main Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico and Peru -3,0% -5,0% -3,1% -3,7% Pauta de exportação Fonte: CEIC Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Source: Bloomberg, CEIC, FMI Main exports Agriculture, Forestry & Extractive Fishing 7,58% Global Outlook Source: CEIC Industry 38,19% Mining 54,23% 5

6 The Chilean economy grew by 1.9% in 2014 compared with 4.2% the previous year. Most of this slackening on the demand side was blamed on investments which shrank by 6.1%. This was due to lower investments in the mining sector that accounts for just over 10% of GDP. These were affected by the lower world demand and fall in ore prices. Other factor behind the retraction in investments was the fiscal reform approved by the government at the end of the third quarter of 2014 which raised taxes on companies' revenues and also eliminated some subsidies in order to increase public spending in the health and education sector. We should also consider the cooling of private Crescimento interanual da renda nominal e real Fonte: Bloomberg consumption which grew by 2.2% in 2014 following a rise of 5.9% in The main reason for this deceleration was the lower growth of real income in the period, as a result of the worsening inflation. This is seen in the discrepancy between the growth in real and nominal income, shown in the following graph. Furthermore, the weaker consumption reflected a worsening in the quality of jobs in recent months. Although no big rise in unemployment has been registered, there has been an increase in the number of part-time and informal jobs with no official contracts or social benefits. Therefore, assuming that those in part-time work and with informal jobs with no social benefits will try and keep their savings high to protect themselves should they lose their jobs, there is a direct impact which leads to a reduction in consumption. 8,0% 7,0% 6,0% Nominal income Real income 6,3% 7,3% 7,1% Interannual growth in real and nominal income 5,0% 5,3% 5,1% 5,1% 4,0% 3,0% 2,0% 3,1% 1,8% 2,9% 2,5% 0,0% Feb-10 Apr-10 1,1% Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Aug-13 Oct-13 Dec-13 Feb-14 0,7% Taxa de desemprego Fonte:Bloomberg Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Source: Bloomberg Unemployment rate 12,0 11,0 10,0 10,9 10,4 10,1 9,0 8,0 7,5 8,7 8,4 7,0 6,7 Source: Bloomberg 6,0 5,0 6,3 5,7 Feb-90 Sep-90 Apr-91 Nov-91 Jun-92 Jan-93 Aug-93 Mar-94 Oct-94 May-95 Dec-95 Jul-96 Feb-97 Sep-97 Apr-98 Nov-98 Jun-99 Jan-00 Aug-00 Mar-01 Oct-01 May-02 Dec-02 Jul-03 Feb-04 Sep-04 Apr-05 Nov-05 Jun-06 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Jan-14 Aug-14 Mar-15 6,1 5,7 6,1 Global Outlook The other demand components (government consumption and net exports) prevented GDP in 2014 cooling even further as they expanded at a higher rate than last year (as can be seen in the following table and graph). It is worth pointing out that the positive contribution by the net exports reflects the strong contraction in imports which ended up offsetting the lower growth of exports in the period. Once again, the decline in world demand and metal commodity prices caused this weak performance by Chilean exports, given the high share of ore (particularly copper) in its main exports. 6

7 GDP Private Consumption Government Consumption Investments Exports Imports % 6.07% 3.55% 11.62% 0.11% 4.78% % 5.86% 3.38% 2.13% 3.37% 1.73% % 2.18% Chile: 4.42% Contribuição para -6.11% o crescimento do PIB0.66% -7.00% Fonte: Bloomberg; FMI Accumulated growth in the year: GDP and demand component Source: Bloomberg, CEIC Chile; contribution to interannual growth of GDP 15,0% 10,0% 3,6% 2,9%2,6%4,1% Household consumption Government consumption Investments Investments Net exports GDP 1,9% 2,4% 2,6%3,9% 0,4% 4,3%3,1% 2,8%2,9% 3,2%6,8%7,4%7,8%7,8% 0,8% 1,5% 1,9% 3,5% 5,0% 2,9% 6,4% 1,3% 5,6% 4,1% 4,9%0,9% 2,9% 5,5% 4,6%3,7%3,4%3,5% 2,3%1,8%1,82% 3,9%4,2%4,3%4,0% 3,4%3,3% -0,2% 1,4% 2,5% 1,4%1,2%0,6% 0,0% -0,7% -0,1% -0,1% -1,1% -1,2% -0,6% -0,6% -2,2% -2,6% -1,1% -1,8% -2,7% -2,2% -3,7% -5,6% -4,7% -3,4% -2,7% -2,4% -3,5% -5,0% -7,4% -6,7% -4,4% -8,1% -5,0% -10,0% Dec-08 Source: Bloomberg, Crescimento IMF acumulado das exportações chilenas em 2014 Fonte: CEIC Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 30,0% 20,0% 10,0% 0,0% -10,0% -5,4% -0,8% 11,9% 2,1% 5,5% 12,6% -0,8% Accumulated growth of Chile's exports in ,0% -16,7% -17,9% -30,0% -40,0% 50% -26,8% -50,0% -60,0% 12% 7% 6% 6% 5% 4% 3% 3% 1% 1% -70,0% Mining: Copper Industry: Food Industry: Agriculture: Industry: Chemical Fruits Others Industry: Pulp and Paper Other products Industry: Forestry and Wood Furniture Beverage and Tobacco Mining: Iron Mining: Gold Source: CEIC Global Outlook The government responded to this situation by adopting a combination of anticyclical measures, taking advantage of the country's sound fiscal situation. Government spending and investments were increased even though tax revenues had fallen. Moreover, the Central Bank of Chile cut base interest rates on eight occasions which took them from 5.0% in September 2013 to 3.0% in October 2014 (the current level). It is worth noting that these successive reductions were made even at a time when inflation was above the target (as shown in the following graph). 7

8 Inflação acumulada em 12 meses x Meta de inflação Fonte: Bloomberg 12,0% 10,0% 8,0% 7,83% 9,85% Inflation 12 months Upper and lower band Inflation accumulated over 12 months versus inflation target 6,0% 4,0% 3,54% 4,49% 4,49% 5,85% 5,22% 4,0% 3,96% 2,0% 0,0% 2,05% 1,00% 2,0% -2,0% -4,0% -0,75% -1,94% Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Source: Bloomberg This prospect of weak economic growth, with inflation above the target, was only reversed at the end of 2014, helped by the fall in oil prices 1 and the monetary stimulus and fiscal measures carried out in 2013 and Inflation was already showing signs of easing even before the end of 2014, reflecting lower pressure from food prices (which declined from 10.2% at the worst moment in October 2014 to 8.9% in December 2014) and the steep fall in energy prices. This led expectations for inflation in 2015 to move nearer the center of the target of 3.00%. The activity indicators released until the beginning of 2015 suggested that the economy had left the worst period behind. Moreover, there was an upturn in copper prices (16.5% rise from the worst moment until the end of April) and a resumption of growth in the consumer and corporate confidence indicators. This improvement fueled expectations that domestic consumption would expand, as would investments, leading the economy to grow at a rate close to 3% in 2015, with inflation within the target, a healthy fiscal situation (the nominal deficit should not exceed 2.5% of GDP despite the worsening in tax revenues and higher spending) and the current account deficit close to zero. Factors like these, combined with expectations of a reversal of the monetary stimulus measures in the last quarter of 2015, should bring greater stability as far as the domestic exchange rate is concerned even in a situation where American interest rates are likely to start returning to normal levels. However, the recent political setbacks, involving corruption scandals, could put this move towards a recovery in business confidence into reverse and, in turn, bring lower investments, which would rein in the country's GDP growth. Global Outlook 1 The fall in oil prices benefits the Chilean economy due to the heavy weighting of energy among its main imports (4.7% of GDP) and the higher domestic purchasing power faced with lower inflation. 8

9 Bradesco Macroeconomic Forecast * 2015* 2016* DOMESTIC ACTIVITY, INFLATION AND INTEREST RATES GDP (%) Agriculture (%) Industry (%) Services (%) Private consumption (%) Government consumption (%) Investment (%) Exports of goods and services (%) Imports of goods and services (%) GDP (R$ billion - current prices) 2,409 2,718 3,107 3,328 3,886 4,374 4,713 5,157 5,521 5,938 6,412 GDP (US$ billion) 1,107 1,395 1,693 1,666 2,208 2,612 2,411 2,390 2,346 1,989 2,099 Population (million) Per Capita GDP (US$ - current prices) 5,865 7,281 8,716 8,469 11,083 13,232 12,105 11,889 11,571 9,732, 10,187 Industrial Production - IBGE (%) Unemployment Rate - IBGE (%) Retail Sales - (%) CPI - IPCA - IBGE (%) CPI - FIPE (%) WPI - IGP-M - FGV (%) Nominal Interest Rates - Selic target (end of period - %) Nominal Interest Rates - Selic target (12-month - %) ,82 10,81 10,81 Real Interest Rates - Selic (12-month - %) ,25 4,54 4,54 EXTERNAL ACCOUNTS AND FX Trade Balance (US$ billion) Exports (US$ billion) Imports (US$ billion) Trade flow (exports + imports) (% of GDP) Deficit of Services and Income (US$ billion) Current Account Deficit (US$ billions) Current Account Deficit (% of GDP) Foreign Direct Investment (US$ billions) FX - end of period (R$ / US$) FX - yearly average (R$ / US$) Nominal FX devaluation (YoY - %) Nominal FX devaluation (average - %) International Reserves (US$ billion) Total Medium and Long term External Debt (US$ billion) FISCAL ACCOUNTS Primary Surplus (R$ billions) Primary Surplus (% of GDP) Public Sector Nominal Balance (% of GDP) Global Outlook Gross Public Debt (domestic and external) (R$ billion) Gross Public Debt (domestic and external) (% of GDP) As of April 30 th (*) Forecast. na = not available. Source: Official figures Production and forecasts(*): BRADESCO 1,359 1,575 1,784 2,027 2,073 2,369 2,773 2,950 3,513 3,867 4,

10 Team Octavio de Barros - Macroeconomic Research Director Marcelo Cirne de Toledo Global economics: Fabiana D Atri / Felipe Wajskop França / Thomas Henrique Schreurs Pires Brazil: Igor Velecico / Andréa Bastos Damico / Ellen Regina Steter / Myriã Tatiany Neves Bast Brazilian sectors: Regina Helena Couto Silva / Priscila Pacheco Trigo / Leandro de Oliveira Almeida Proprietary survey: Fernando Freitas / Leandro Câmara Negrão / Ana Maria Bonomi Barufi Internships: Ariana Stephanie Zerbinatti / Thomaz Lopes Macetti / Victor Hugo Carvalho Alexandrino da Silva / Davi Sacomani Beganskas / Ives Leonardo Dias Fernandes / Henrique Neves Plens / Mizael Silva Alves Team - BRADESCO does not accept responsibility for any actions/decisions that may be taken based on the information provided in its publications and projections. All the data and opinions contained in these information bulletins is carefully checked and drawn up by fully qualified professionals, but it should not be used, under any hypothesis, as the basis, support, guidance or norm for any document, valuations, judgments or decision taking, whether of a formal or informal nature. Therefore, we emphasize that all the consequences and responsibility for using any data or analysis contained in this publication is assumed exclusively by the user, exempting BRADESCO from all responsibility for any actions resulting from the usage of this material. We all point out that access to this information implies acceptance in full of this term of responsibility and usage. The reproduction of the content in this report (partially or in full) is strictly forbidden except if authorized by BRADESCO or if the sources (the name of the authors, publication and BRADESCO) are strictly mentioned. 10