Over the long-term, Brazil will only experience modest levels of growth as structural headwinds limit any quick economic solutions to the challenges faced from falling global commodity prices. Growth will only return to the economy following two consecutive years in recession in both 2015 and 2016.
Widespread public unrest, sweeping corruption scandals, and deepening polarisation will keep political risk elevated over the coming quarters, weighing on investor sentiment and contributing to extreme uncertainty in terms of policy direction. Over a multiyear timeframe, the Brazilian electorate will demand progress on promised reforms, including higher-quality public services and greater government transparency.
Major Forecast Changes
We forecast that the real will average BRL3.580/USD in 2016, rather than our previous forecast of BRL4.000/USD. This is due a strong start to the year for the currency, as well as a significant upgrade in our current account deficit forecast. We forecast the current account shortfall will amount to 1.3% of GDP in 2016, the result of a sharp reduction in import demand and a rebound in exports.
|e/f= BMI estimate/forecast; Source: National Sources, BMI|
|Real GDP growth, % y-o-y||0.1||-3.8||-4.0||1.0|
|Nominal GDP, USDbn||2,416.0||1,772.4||1,722.2||1,929.5|
|Consumer price inflation, % y-o-y, eop||6.4||10.7||8.0||5.2|
|Exchange rate BRL/USD, eop||2.66||3.96||3.50||3.35|
|Budget balance, % of GDP||-6.0||-10.4||-10.6||-9.1|
|Current account balance, % of GDP||-4.3||-3.3||-1.9||-1.6|
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