Brazil’s Economic Outlook
Transcript of Brazil’s Economic Outlook
June 08, 2021
J.P. Morgan Live Teleconference
Brazil’s Economic Outlook and Agenda BC#
Roberto Campos NetoGovernor of Banco Central do Brasil
0
100
200
300
400
500
600
700
800
900
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
2
COVID-19Covid-19: new cases and new deathsGlobal scenario
Source: Our World in Data. Last data: 06 June, 2021, except Latin America (01 June 2021)
New cases/million(7-day rolling average)
UK
US
Brazil
Europe ex UK
Lat. Am. ex Brazil
New deaths/million(7-day rolling average)
0
2
4
6
8
10
12
14
16
18
20
0
2
4
6
8
10
12
14
16
18
20
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
2151.3 (27.6%)
777.9 (54%)
301.6 (91.1%)
269.2 (60.5%)
228 (16.5%)
71.7 (33.7%)
68 (100.2%)
34.5 (26.7%)
30.9 (36.6%)
30.7 (21%)
338.8 (9.5%)
World
China
United States
European Union
India
Brazil
United Kingdom
Mexico
Turkey
Russia
Rest of the world
GLOBAL ECONOMYCovid-19 vaccinationVaccination
The biggest vaccination campaign in history
3
Millions of administered doses(millions and % of population*)
Vaccine doses per capita
Note: * The number of administered doses is higher than or equal to the number of people vaccinated. In some countries, some people have already taken the second dose. Therefore, the percentage in relation to the population should be understood as “maximum percentage of the vaccinated population”.
CanadaUSA
Europ. UnionUK
JapanAustralia
IsraelChile
MexicoPeru
Argentina
Source: Natwest, based on pharmaceutical company data, Bloomberg, Reuters, NY Times, Fierce Pharma, Financial Times.
BrazilIndia
South KoreaSwitzerland
Czech Republic Hungary
TurkeyIndonesiaColombia
PolandPhilippines
UruguaySouth Africa
ThailandMalaysia
Brazil
Coronavac
AZ-Oxford
Registered vaccination
0
500
1,000
1,500
2,000
1-Jan 1-Feb1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct
Pfizer
DOMESTIC ECONOMYVaccination
4Sources: Ministry of Health, press, https://coronavirusbra1.github.io, BCB.
Accumulated doses Estimated offer x registered (millions)
Daily dosesEstimated offer x registered (thousands/day)
Dose schedule
Availability of doses based on a schedule published by the Ministry of Health on June 2, with adjustments that reflect news published by the press. Scenario considersAstrazeneca-Oxford, Coronavac, Pfizer-BioNTech and Janssen vaccines. There is uncertainty about the dose delivery schedule. Monthly distribution of Pfizer-BioNTech andAstrazeneca-Oxford (Fiocruz) vaccines in the 3rd quarter is estimated based on previous Ministry of Health schedules (ref. 15/Mar and 19/Mar) and may not represent the mostcurrent forecast of the Ministry. Registered vaccination based on data from the health departments collected at http://www.giscard.com.br/ andhttps://coronavirusbra1.github.io/.
Vaccination in Brazil
Estimated offer
Registered vaccination
0
50
100
150
200
250
300
1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct
Laboratory Expected doses Schedule
CoronaVac
(Butantan)130m
52m at 1st
Half +
48m at 3rd
Quarter +
30m at 4th
Quarter(*)
AZ Oxford
(Fiocruz)200m
62m at 1st
Half +
38m at 3rd
Quarter +
100m at 4th
Quarter(**)
AZ Oxford
(Serum Inst.)12m
4m at 1st
Half +
8m at 4th
Quarter
Pfizer /
BioNTech200m
16m at 1st
Half +
84m at 3rd
Quarter +
100m at 4th
Quarter
Covax
Facility42m 10m at 1
st Half
Janssen 38m 4th
Quarter
Covaxin
(Bharat Biot.)20m
Without Anvisa's
approval
Sputnik V
(União Quím.)10m
Without Anvisa's
approval
Moderna 50m In negociation
* Doses in negociation.
** Part of the doses still in negociation.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul
Degree of protection in relation to deaths
compared to a scenario without vaccinaion
Effective protection 14 days after the 1st dose
Effective protection 14 days after the 2nd dose
80 +
DOMESTIC ECONOMYVaccination in Brazil: a simplified exerciseVaccination
5
Availability of doses compiled from schedule released by the Ministry of Health on June 2, with adjustments that reflect news published by the press. Population groups generally followthe National Plan for the Operationalization of Vaccination against Covid-19 (7th edition). Only vaccines with a signed delivery contract and authorization for use by Anvisa wereconsidered (Astrazeneca-Oxford via Fiocruz, Coronavac, Pfizer-BioNTech, Astrazeneca-Oxford and Pfizer-BioNTech via Covax consortium). Sputnik V and Covaxin vaccines are notconsidered as they have not yet been authorized for use by Anvisa. It was not considered the Moderna vaccine, as it is still under negotiation. There is uncertainty about the dosedelivery schedule – graphs generally indicate a possible scenario for the campaign. Registered vaccination based on data from the health departments collected byhttp://www.giscard.com.br and https://coronavirusbra1.github.io.
This is a simplified scenario for the purpose of indicating the degree of protection over time afforded by vaccination.
The scenario assumes 90% efficacy of vaccines regarding to deaths by Covid-19 and a simplified vaccination strategy based on age.
Notes:
Vaccination order for priority groups follows in a simplified form the National Plan for the Operationalization ofVaccination against Covid-19 (7th edition). Only vaccines with a signed delivery contract and authorization for useby Anvisa were considered. There is uncertainty about the dose delivery schedule. Degree of protection isobtained, at each date, based on the multiplication of the supposed efficacyfor the vaccines by the percentage ofvaccinated in age group and by the participation of each age group in the total of deaths per Covid. Indicatedefficacy is hypothetical - actual efficacy and its evolution between doses should vary according to the vaccine.Exercise is only indicative of the benefit resulting from the vaccination campaign, taking into account theconcentration of serious events among priority groups. Other hypotheses adopted: a) 100% of each target groupis vaccinated; b) effective vaccination follows the offer of doses; c) mortality reference by age group follows the2020 pattern of deaths by SRAG Covid (ref. Epidemiological Bulletins of the Ministry of Health); d) the 2nd dose isassigned to the groups according to the order of priority, although, in reality, the 2nd dose of some high priorityindividuals occurs after a longer period, due to the longer interval between doses of the AZ vaccine; e) thesupposed effect for the vaccines occurs in full 14 days after the 1st or 2nd doses; f) prior immunity fromcontamination is not considered.
Source: BCB
0
20,000
40,000
60,000
80,000
100,000
120,000
1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul
Tho
usa
nds
Vaccined with 1 dose
AZ + CV + Pfizer
40 to 49
50 to 59
30 to 39
60 to 64
65 to 6970 to 74
75 to 7980 +
Health care workers
Registered
Vulnerable Communities
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul
Tho
usa
nds
Vaccined with 2 doses
AZ + CV + Pfizer
60 to 64
65 to 69
70 to 74
75 to 79
80 +
Health care workers
Registered
Vulnerable Communities
4.0 3.1 3.5 3.3
-4.3-2.3
1.4 2.6
11.61.1 2.1 1.4 2.5
-1.4
4.9 2.22.5
4.5
1.2 0.9 1.0
-1.1
0.61.3
1.4
2.2
5.8
-6.8
3.2 4.9 6.5
18.3
-10
-5
0
5
10
15
20
Mar-19 Sep-19 Mar-20 Sep-20 Mar-21
YoY
(%)
an
d c
on
trib
uti
ons
(p.p
.)
Consumption (p.p) Investiment (p.p) Net Exports (p.p) GDP (%YoY)6
GLOBAL ECONOMYGlobal economic activity
Global economic recovery continues to be directly linked to the evolution of the pandemic and containment measures.
Sources: Bloomberg, BEA, National Bureau of Statistics
GDP*Average 2019 = 100
*Series at constant prices, seasonally adjusted. The series 'Asia ex. Japan and China' was calculated as a weightedaverage of Singapore, South Korea, Hong Kong, India, Indonesia, Philippines, Malaysia, Thailand, Taiwan and Turkey.
The series of Singapore, India and Indonesia are not seasonally adjusted.
USA
GD
P(Q
4 1
9 =
10
0)
Ch
ina
GD
P
99.1100.0
104.9
88.4
101.1100.9
75
80
85
90
95
100
105
4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21
GDP (6.4) Consumption (11.3)Investments, ex inventories (11.3) Exports (-2.9)Imports (6.7) Government (5.8)
Numbers in ( ) represent Q1 21 % changes, in % QoQ SAAR.
75
80
85
90
95
100
105
110
Q12019
Q2 Q3 Q4 Q12020
Q2 Q3 Q4 Q12021
Ave
rage
20
19
= 1
00
China Asia ex Japan and China USA Japan Euro area UK
7
GLOBAL ECONOMYGlobal mobility
Economies have adapted: the impact of mobility on activity has fallen by half in the recent period
Sources: Google, Bloomberg, Vinland.
Dependent Variable: Δ PMI Services
Method: Panel Least Squares
Sample: 2020 - M3 - 2021 M3
Cross-sections (countries): 13
Specifications
Full mar/20 - oct/20 -
Sample sep/20 mar/21
Períods: 13 7 6
Total panel (balanced) 169 91 78
Independent variables
Constant 0.89 1.11 0.72
(0.51)* (0.79) (0.63)
Δ Google retail/recreation 0.39 0.51 0.25
(0.06)*** (0.08)*** (0.07)***
Fixed effects: Cross-section
Fixed effects: Period
R² adj. 0.69 0.76 0.08
DW 2.06 1.80 2.38
( ) Standard-deviation
Significance level: *10%, **5%, ***1%.
Google Mobility x PMI Services (grouped)
Delta Mobility Google – Retail and Recreation (%)
De
lta
PM
I Se
rvic
es
-12 -10 -8 -6 -4 -2 0 2 4 6 8 10
Russia
Brazil
South Africa
Mexico
Argentina
Colombia
Chile
Malaysia
Peru
2022
2021
2020
Brazil
ColombiaMexico
South Africa
RussiaChina
27
32
37
42
47
52
57
62
67
Jan-20 May-20 Sep-20 Jan-21 May-21
Manufacturing PMI
8
GLOBAL ECONOMYEmerging marketsOngoing recovery
Sources: Markit; ABSA (South Africa); NBS (China). Sources: Bloomberg and Focus Report.
Retail sales (YoY)
GDP forecasts (%)
Brazil
India
-50
-30
-10
10
30
50
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21
Brazil Chile Colombia Mexico South Africa Russia
9
Covid-19 Government Fiscal Responses
Source: IMF WEO April 21
GLOBAL ECONOMY
Advanced Countries Emerging and Middle-Income Countries
Above line: Additional spendingandforgone revenue. Below line: Equity, loans and guaranteesFiscal announcements until March 17th (except for Brazil). USA includes American Rescue Plan Act (US$ 1.9tril lion, 9.1% GDP).
For Brazil, numbers include the following measures approved in 2021. Above line: New EmergencyCash Transfer program (R$ 44 bi), budget expansion of family allowance program “Novo Bolsa Família”(R$ 5 bi) and extension of furlough program “BEm”(R$ 10 bi), total R$ 59 bi (0.8% GDP). Below line:SME support program “Pronampe” (R$ 5 bi, 0.1% GDP).
2.5 4.2 4.2 4.5 4.5 5.1 5.4 7.3 7.6 7.6 8.0 8.5 11.0 14.6 15.9 16.0
16.1
16.2 16.4
19.3
25.5
7.5 4.3 5.3
10.28.2
13.615.4
6.2
14.4 15.611.8
35.327.8
4.0
28.3
4.71.8
16.111.3
2.8
2.4
0
10
20
30
40
50
Fin
lan
d
No
rway
Swed
en
Ko
rea
Net
he
rlan
ds
De
nm
ark
Cze
ch R
ep
Swit
zerl
and
Spai
n
Fran
ce
Be
lgiu
m
Ital
y
Ge
rman
y
Can
ada
Jap
an
Sin
gap
ore
Au
stra
lia UK
AEs
New
Ze
ala
nd
USA
% G
DP
Above line Below line
0.71.6 1.9 2.0 2.0 2.2 2.2 2.4 2.5 2.7
2.7 3.33.9 4.0 4.1 4.3 4.5 4.5
4.8
5.9 6.1 7.3 7.8 8.2 8.2 9.11.2
0.1
9.4
0.0 1.6 0.8
4.43.1
0.0 0.8 0.9
5.1
2.0 2.5
5.7
1.5
3.9
0.91.3
4.1
0.0
11.4
5.4
1.8
4.2
6.3
0
3
6
9
12
15
18
21
Mex
ico
Egyp
t
Turk
ey
Pak
ista
n
Alb
ania
S A
rab
ia
Ro
man
ia
Kaz
akh
stan
UA
Em
irat
es
Tun
isia
Ph
ilip
pin
es
Ind
ia
Arg
enti
na
EMM
IEs
Co
lom
bia
Ru
ssia
Bu
lgar
ia
Ind
one
sia
Ch
ina
Sou
th A
fric
a
Ge
org
ia
Per
u
Po
lan
d
Ch
ile
Thai
lan
d
Bra
zil
% G
DP
Above line Below line
0
14
28
42
56
70
84
98
112
126
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
Angola
Egypt
South Africa
Morocco
Algeria
Nigeria
India
Pakistan
China
Malaysia
Turkey
Kazakhstan
Azerbaijan
Russia
Thailand
Philippines
Croatia
Hungary
Ukraine
Romania
Belarus
Brazil
Uruguay
Bolivia
Colombia
Ecuador
Peru
Chile
Mexico
Dominican Rep.
Oman
Islamic Re. of Iran
Un. Arab Emirates
Source: IMF WEO Apr/21.
GLOBAL ECONOMYFiscal responseFiscal Policy
10
Historical pattern of general government debt(% of GDP)
Advanced Emerging
140
120
100
80
60
40
20
0
Gross Debt – emerging markets(% of GDP)
AFR
ICA
ASI
A E
X M
IDD
LE E
AST
EUR
OP
ELA
TIN
AM
ERIC
AM
IDD
LE E
AST
Brazil
Differentiation in risk appetite for emerging economies with unfavorable economic fundamentals remains.
11
EME Group 1:Chile, Indonesia, Malaysia and Russia.Gross Debt/GDP (average 2017-21) = 34.9%
EME Group 2:Brazil, Colombia, India, Mexico, South Africa and Turkey.Gross Debt/GDP (average 2017-21) = 65%
Risk Appetite
GLOBAL ECONOMYRisk AppetiteMarkets
Sources: BCB, Bloomberg, Refinitiv, IMF, Fed St Louis. Gross Debt: IMF. Data up to May 7th, 2021.
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
Jan Mar May Jul Sep Nov Jan Mar May
2020
Advanced economies
EME (Group 1)
EME (Group 2)
1.03
0.77
-1.14
2021
0
20
40
60
80
2018 2019 2020F 2021F
Gross Debt/GDP
Group 1 Group 2
-7
-6
-5
-4
-3
-2
-1
0
1
2
2017 2018 2019
Stan
dar
d d
evi
atio
ns
fro
m th
e a
vera
ge
12
GLOBAL ECONOMYFinancial conditions and yieldsMarkets
Financial conditions more stimulative in the US. Increase in long term yields, especially in the US and the UK.
*Accumulated change since January 1st, 2021.
Change in 10-year yield* (YTD b.p.)GS Financial Conditions Index
Source: Bloomberg
-5
10
25
40
55
70
85
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21
USA UK Germany Japan
97
98
99
100
101
102
103
104
Jan
-20
Feb
-20
Mar
-20
Ap
r-2
0
May
-20
Jun
-20
Jul-
20
Au
g-2
0
Sep
-20
Oct
-20
No
v-2
0
De
c-20
Jan
-21
Feb
-21
Mar
-21
Ap
r-2
1
May
-21
Jun
-21
US UK Euro Area Japan
13
Inflation expectations
Source: Bloomberg
Implicit inflation (5-years break-even)
GLOBAL ECONOMYMarkets
-1
0
1
2
3
4
Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
UK
USA
Australia
Germany
Japan
14
Housing Prices
Source: Bloomberg, H@R
GLOBAL ECONOMYMarkets
19.1
13.0
12.0
10.9
8.1
7.9
7.1
6.1
3.6
1.6
0 10 20
Nova Zelândia
Suécia
EUA
Noruega
Alemanha
Canadá
Reino Unido
França
Austrália
Itália
Pré pandemia Atual
7.9
8.1
10.9
12.0
13.0
19.190
103
116
129
142
155
FIN
CH
L
EST
JPN
BEL
AU
S
NO
R
IRL
GB
R
FRA
TUR
EA1
7
NZL
**
SVN
SWE
MEX
DE
U
CZE
RU
S
SVK
LUX
2020-Q4
2019-Q4
* 2021-Q1; ** 2020 - Q3
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
199
3Q2
199
5Q1
199
6Q4
199
8Q3
200
0Q2
200
2Q1
200
3Q4
200
5Q3
200
7Q2
200
9Q1
201
0Q4
201
2Q3
201
4Q2
201
6Q1
201
7Q4
201
9Q3
202
1Q2
Percentil 5 Média Percentil 95 Ocorrida
Italy
Australia
France
UK
Canada
Germany
Norway
USA
Sweden
NZ
Pre-pandemic Today
1.6
3.6
6.1
7.1
Housing Prices Price-to-rent House@RiskHousing prices in the US – 3 years changeOCDEYoY (%)
**2020 – Q3
15
US housing prices and inflation
Source: Bloomberg, FRED St. Louis
GLOBAL ECONOMYMarkets
9.49
4
6
8
10
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
US Housing Components Rent Price Expectation 1 Year Ahead
-25
-20
-15
-10
-5
0
5
10
15
20
-1
0
1
2
3
4
5
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
CPI Owner´s Equivalent Rent CPI Primary Rents Case-Shiller Index
%
YoY%
YoY%
16
GLOBAL ECONOMYEmerging markets: yield curves Markets
Source: Bloomberg
Rat
e (%
)Va
riat
ion
(b.p
.)
sinc
e Ja
n 20
th
South AfricaBrazil
Colombia
Indonesia
Mexico Russia
Chile
Yield curves Slope for 2 x 5 years (b.p.)
Brazil
South Africa
Mexico
Russia
Colombia
Tenure
Yields and food inflation
Yields and food CPI – Selected countries
Source: Bloomberg
17
GLOBAL ECONOMY
Change in 5-year yield (YTD b.p.)
-35
65
165
265
365
465
565
665
-35
65
165
265
365
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21
Brazil Chile Colombia
Indonesia Mexico Russia
South Africa Turkey (right) India
125
120
110109108108108105
103
97
90
95
100
105
110
115
120
125
130
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21
CPI Food (Jan/2020 = 100)
TurkeyBrazilRussiaColombiaSouth AfricaMexicoChileIndiaPeruChina
Commodity prices: disagreggated
Brent, metals, iron ore and grains
Source: Bloomberg
18
GLOBAL ECONOMY
25
50
75
100
125
150
175
200
Brent Metals Index Grains Subindex Iron Ore
19
DOMESTIC ECONOMYBrazil: GDPEconomic Growth
Sources: IBGE and Focus Report.
GDP Forecast for 2021
(Median of market expectations –
Focus)
2021+4.36%
GDP(2019=100)
88
90
92
94
96
98
100
102
104
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I
2014 2015 2016 2017 2018 2019 2020 2021
2020-4.1%
20
DOMESTIC ECONOMYHigh frequency indicatorsEconomic growth
Sources: ONS, seasonally adjusted by BCB; Fenabrave. Source: Câmara Interbancária de Pagamentos (CIP)
Vehicle sales(2019=100; s.a.)
20
40
60
80
100
120
140
Jan-20 May-20 Sep-20 Jan-21 May-21
Cars and lightcommercials
Trucks
Electricity demand(mm7d; 2019=100)
Debit card salesmm7d; Nominal values (BRL billions)
85
90
95
100
105
110
Jan-20 May-20 Sep-20 Jan-21 May-21
F1.3
1.8
2.3
2.8
3.3
3.8
Jan-20 May-20 Sep-20 Jan-21 May-21
21
DOMESTIC ECONOMYMobility
Partial recovery in mobility
Fontes: Google, Moovit and Waze.
TransportPublic transport and car use– change (%)
-75
-65
-55
-45
-35
-25
-15
-5
5
15
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21
non-essential retail locations and leisure workplacesF
Google Mobility Indicator(mm7d; change (%) comparing to a 1 to 7 Mar/2020)
-75
-65
-55
-45
-35
-25
-15
-5
5
15
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21
Public transport - Movit indicator in selected capitals - change (%) comparing to 2-8Mar/2020Car use - Waze indicator, MM7D - change (%) comparing to 11-25 Feb/2020
55
60
65
70
75
80
85
90
95
100
105
110
115
120
Nov-19 May-20 Nov-20 May-2155
60
65
70
75
80
85
90
95
100
105
110
115
120
Nov-19 May-20 Nov-20 May-21
DOMESTIC ECONOMYConfidence indicators
Sources: FGV. Seasonally adjusted data.
22
< R$ 2.1 thousand
Business confidence X consumer confidence Consumer confidenceBy income range (in BRL thousand)
Manufacturing
ConstructionCommerceServices
Average 2018-2019= 100
Average 2018-2019= 100
> R$ 9.6 thousand
R$ 4.8 to 9.6 thousand
Consumer
R$ 2.1 to 4.8 thousand
DOMESTIC ECONOMYConsumer inflation: IPCAInflation
Sources: IBGE, BCB, Relatório Focus.
23
2.9
3.3
3.7
4.1
4.5
4.9
5.3
5.7
Jan-20 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 May-21
2021
2022
2023
IPC
A fo
reca
sts
-0.80
-0.35
0.10
0.55
1.00
1.45
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21Monitored Services Industrial Goods Food
(p.p.)
Co
ntr
ibu
tio
n to
M/M
ch
ange
0
1
2
3
4
5
6
7
8
9
10
11
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
IPCA
Target 6.76
IPC
A –
YoY(
%)
-6
1
8
15
22
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
Food at home Administered prices Industrials goods Services
Infl
atio
n b
reak
do
wn
Brazil, 104Chile, 103
Mexico, 105
Colombia, 102
China, 100
Turkey, 120
Russia, 107
S. Africa, 105
99
102
105
108
111
114
117
120
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21
CPI Core: Brazil and other countries (Index, jan/20 =100)
DOMESTIC ECONOMYCore inflation: Brazil x other countriesInflation
Sources: IBGE, Bloomberg, BCB
24
April/21USA: 3.0Brazil: 2.9
0
1
2
3
4
5
6
7
8
9
Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
Core inflationYoY (%)
25Sources: BCB. Rates estimated from DAP.
Inflation expectations – Brazil
DOMESTIC ECONOMYInflation Implicit inflation
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Break-even 2021 Break-even 2022
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
Break-even 2023 Break-even 2024
DOMESTIC ECONOMY
26
• In its 238th meeting, the Copom unanimously decided to increase the Selic rate by 0.75 p.p. to 3.50%p.a.
• The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over therelevant horizon for monetary policy, which includes 2022.
• Without compromising its fundamental objective of price stability, this decision also implies smoothing ofeconomic fluctuations and fosters full employment.
• At this moment, the Copom's baseline scenario indicates that a partial normalization of the policy rate remainsappropriate to keep some degree of monetary stimulus during the economic recovery. However, the Committeeemphasizes that there is no commitment with this plan, and that future steps of monetary policy could beadjusted to assure the achievement of the inflation target.
• For the next meeting the Committee foresees the continuation of the partial normalization process with anotheradjustment of the same magnitude in the degree of monetary stimulus. The Copom emphasizes that its viewwill continue to depend on the evolution of economic activity, the balance of risks, and inflation projections andexpectations.
Monetary policy
238th Copom meeting – May 2021
27
DOMESTIC ECONOMYFiscal budget: decomposition
Source: STN, BCB
Improvement in fiscal accounts.
10
5
1
8Non recurring
Recurring - residual
Recurring linked toreal GDP
Recurring linked toGDP deflator
Total: 25 %
*Exercise prepared considering the elasticity of net recurringrevenue/nominal GDP of 1.1. The same elasticity was considered forthe real component and for the deflator. Preliminary figures for Aprilnominal GDP.
Net Revenues of the Central GovernmentDecomposition of Variation*
Accum. Jan-April/21 (%YoY)
Recurring:17 p.p.
400
600
800
1,000
1,200
1,400
1,600
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Jan
-12
Jan
-13
Jan
-14
Jan
-15
Jan
-16
Jan
-17
Jan
-18
Jan
-19
Jan
-20
Jan
-21
Deflated by IPCA Deflated by GDP deflator
Spending ceiling
Recurring expenses of the Central GovernmentAccum. 12 months (BRL billions – Jan/21)
28
DOMESTIC ECONOMYStock marketsMarkets
Source: B3
Accumulated flows into the stock market
BRL -18.4 bi
BRL -31.5 bi
BRL +67.1 bi+ R$ 67.4 bn
-100
-80
-60
-40
-20
0
20
40
60
80
100
Individuals Institutionals Foreigners
BRL bln
+ R$ 63.1 bln
- R$ 0..4 bln
- R$ 47..4 bln
29
DOMESTIC ECONOMYForeign exchange derivativesMarkets
Source: B3
-50
-40
-30
-20
-10
0
10
20
30
40
50
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21
Institutionals Non-residents Banks Central Bank Net Flow
USD Billions
Investors’ position change in foreign exchange derivatives at B3
External sector
30
DOMESTIC ECONOMY
Sources: BCB, Bloomberg.
Effective foreign exchange rate and terms of trade
-0.84%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Apr-19 Apr-21
Trade balance Services Income Current account
Current Account(12 months accumulated, % of GDP)
-10
-6
-2
2
6
10
14
18
2240
60
80
100
120
140
160
Apr-03 Apr-06 Apr-09 Apr-12 Apr-15 Apr-18 Apr-21
Real Effective Exchange Rate (Jun/94=100) Terms of Trade (reversed)
20%
13%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
Cen
ten
as
31
DOMESTIC ECONOMYCredit in the National Financial SystemCredit Market
Credit continue to increase. Interest rates close to historically low levels.
Source: BCB
Households Corporate Total
Interest rates(% per year)
Outstanding credit(YoY)
15%
16%
14%
-9%
-5%
-1%
3%
7%
11%
15%
19%
23%
Apr-17 Apr-18 Apr-19 Apr-20 Apr-21
32Source: BCB
DOMESTIC ECONOMYFirms: financial flows
mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192
mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192
Public Adm. and NGOs 9% -4% -2% 2% 0% 28% 21% 1% -11% 3% 5% 8% 16% 7% 14% -2% 3% 15% 0% 5% 10%
Agriculture 22% 28% 40% 38% 56% 66% 102% 18% 22% 25% 23% 39% 50% 81% 30% 33% 17% 21% 40% 48% 107%
Food 22% 14% 27% 31% 36% 51% 63% 8% 10% 17% 21% 32% 39% 44% 14% 16% 15% 24% 27% 33% 49%
Automotive 11% -7% 23% 37% 46% 89% 55% 2% -30% -4% 17% 29% 50% 27% -2% -50% -21% 3% 27% 52% 11%
Beverage and tobacco 28% 13% 34% 45% 51% 88% 82% 5% 0% 15% 18% 15% 27% 18% -10% -13% 15% 12% 16% 28% 5%
Const., wood and furn. 17% 3% 24% 35% 40% 72% 65% 9% -6% 9% 22% 31% 45% 45% 1% -13% 16% 31% 44% 66% 49%
Animal husbandry 27% 24% 46% 50% 51% 64% 86% 12% 9% 24% 33% 39% 48% 53% 14% 8% 19% 32% 27% 34% 40%
Electronics 16% 1% 26% 33% 38% 71% 57% 0% -10% 5% 21% 35% 51% 33% 12% -10% 29% 59% 34% 53% 37%
Energy 2% -10% -11% 17% 47% 47% 34% 23% -4% 18% 35% 37% 45% 56% 13% -5% 25% 18% 26% 31% 25%
Mach. and equipment 12% -4% 10% 26% 41% 62% 55% 11% -5% 7% 35% 37% 49% 51% 18% 4% 19% 33% 41% 72% 125%
Media and Leisure 13% -38% -22% -1% 3% 63% 1% -1% -47% -41% -19% -11% 3% -25% 9% -37% -36% -20% -16% -5% -21%
Paper and cellulose 13% -4% 16% 37% 81% 129% 109% -1% -14% -2% 27% 53% 76% 63% -4% -26% -17% 7% 28% 44% -8%
Petrochemicals 20% -9% 12% 24% 37% 83% 62% 11% -20% -1% 14% 27% 44% 37% 5% -33% -9% 0% 24% 51% 25%
Chem., pharma and hyg. 17% 14% 22% 27% 31% 29% 46% 8% 3% 11% 21% 32% 38% 37% 12% 6% 5% 10% 20% 24% 30%
Health, san. and educ. 18% -2% 2% 8% 18% 36% 37% 8% 1% 1% 8% 19% 27% 32% 2% -8% -11% 0% 17% 31% 29%
Services 16% -9% 11% 21% 33% 76% 53% 11% -5% 4% 10% 15% 25% 22% 21% 15% 36% 33% 35% 41% 61%
Steel and metallurgy 7% -3% 23% 41% 84% 129% 103% 1% -14% 8% 31% 78% 100% 92% -3% -29% 1% 18% 85% 119% 63%
Sugar and alcohol 14% -9% 47% 22% 36% 46% 20% 31% 8% 19% 10% 27% 65% 69% 15% -15% 4% -1% 8% 17% 13%
Telecom 35% 34% 40% 46% 53% 60% 109% 15% 45% 28% 19% 30% 34% 33% 21% -26% -20% -5% -16% 7% -16%
Textiles and others 9% -26% -5% 12% 18% 84% 20% 2% -34% -19% 6% 20% 43% 13% 2% -44% -27% 1% 12% 36% -1%
Transports 7% -5% 9% 19% 34% 57% 46% 6% -9% -2% 7% 20% 36% 32% 8% -22% -20% -14% 2% 13% 6%
Retail 22% 17% 32% 39% 39% 50% 62% 19% 20% 22% 27% 27% 29% 43% 13% 8% 17% 18% 17% 16% 20%
Others 5% -11% 3% 46% 42% 85% 50% 15% -4% 16% 27% 23% 34% 43% 4% -4% 24% 17% 25% 27% 23%
SectorMediumMicro and small Corporate
Financial flowsPercentual change in financial inflows (quarterly average current year x quarterly average previous year)
Quantity of Firms
¹ Variation between April/21 and April/20
² Variation between April/21 and April/19
* Quantity of firms with financial transactions in the National Financial System (SFN)
*
0
2
4
6
8
10
1 2
0
30
60
90
120
150
1 2
0
1
2
3
4
5
1 2
Mic
ro a
nd
sm
all
(mil
lio
ns)
Me
diu
m(t
ho
usa
nd
s)
April/19 April/21
April/19 April/21
April/19 April/21
Co
rpo
rate
(th
ou
san
ds)
33
DOMESTIC ECONOMYCorporate financial indicators
Source: Economática
ProfitabilityNet profit/Average shareholders' equity
-30
-15
0
15
30
Mar2015
Mar2017
Mar2019
Mar2021
%
0
5
10
15
20
Mar2015
Mar2017
Mar2019
Mar2021
Interest Coverage RatioEBITDA/Interest expense
0.0
2.5
5.0
7.5
10.0
Mar2015
Mar2017
Mar2019
Mar2021
Net debt/EBITDA
34
35
TechnologyAgenda
36
33.5 144.6 200.4 275.5 393.7 500.0
29.6
121.5
160.1
197.7
278.4
322.0
0.010.020.030.040.050.060.070.080.090.0100.0110.0120.0130.0140.0150.0160.0170.0180.0190.0200.0210.0220.0230.0240.0250.0260.0270.0280.0290.0300.0310.0320.0330.0340.0
- 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 170.0 180.0 190.0 200.0 210.0 220.0 230.0 240.0 250.0 260.0 270.0 280.0 290.0 300.0 310.0 320.0 330.0 340.0 350.0 360.0 370.0 380.0 390.0 400.0 410.0 420.0 430.0 440.0 450.0 460.0 470.0 480.0 490.0 500.0 510.0 520.0
Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21
Number of transactions (millions) Volume (R$ billions)
351 354 314 306 358 336
22 17 14 9
9 8
192 189
123 112
120 111
34145
200 275
394 500598
704652
702
880
954
-
80
160
240
320
400
480
560
640
720
800
880
960
1,040
Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21
PIX gains space
37Source: BCB.
households
million keys
Total : 254.3 miin May/2021
PIX keys(in millions)
87.8 mi
243.9
5.8 mi
10.4
legal entities
Number of transactions and volume(in million of transactions and BRL billions)
Pix versus other instruments(in million of transactions)
Total ◼ Pix ◼ TED ◼ DOC◼ Bank Billet (‘boleto’)
million keys
PIX: Next steps
contactless Pix(For transactions carried out through short-range wireless connectivity technology)
offline Pix
.Payer offline and payee online
.Both offline
mechanism of transaction reversal (for fraud or operational error)
3º quarter 2022
4º quarter
Pix Saque (cash withdrawal) and Pix Troco (cashback)
scheduled payments
no-priority settlement
scheduled guaranteed transactions
direct debit
Pix for cross-border payments
[...]
*Linked to Open Banking: Payment initiator at Pix
Future Agenda
14/May
Pix Cobrança(invoice payments - for payments with due date)
In public consultation: Pix Saque (cash withdrawal)| Pix Troco (cashback)
General remarks
To increase the capillarity of cash withdrawal places for the final users
Public objectives
To improve the withdrawal offering conditions by the digital institutions, promoting more competition at the financial system
Premise
Service available to anyone who have account in any Pix participant
How does it work today?
Open banking
40
Open BankingAGENDA BC#
Devices to Compare Services and Fees
Financial Advice and Planning for Households
Apps
Payments Initiation in Social Medias Credit Marketplace
• Implementation will be phased throughout 2021.
• Solutions that can be developed from Open Banking:
Goals:
• To promote competition, efficiency and data safety
• Proper balanced conditions between existing financial institutions and new players
41
Regulatory SandboxAGENDA BC#
BCB’s Regulatory Sandbox starts in 2021 with the Cycle 1.
During the sandbox licensing process, BCB will assess whether the submitted projects comply with the definition of innovative project and whether their development is under the regulatory scope of BCB and CMN, among other criteria.
Legal persons, notary and registration service providers, public companies, and semi-public companies can participate, even when not yet fully licensed by BCB.
Simplified monitoring procedures will be adopted, considering the complexity and risks associated to each innovative project and, should BCB deems appropriate, additional limits and criteria may be applied.
By the end of cycle 1, participants may obtain a permanent license from BCB to operate. The projects may be a stepping stone for the improvement of the regulation issued by BCB and CMN.
TO UNDERSTAND THE REGULATORY SANDBOX
42
Text
Payments
Content
Financial Innovation
Intensive use of clouding
ConvergenceAGENDA BC#
43
Digital currencyOpen Banking
• Simplification• Internationalization• Convertibility
Innovation in the currency
Innovation in the financial systemAGENDA BC#
A CBDC for Brazil:
The Digital Real
45
One more instrument for BCB to fulfill its mission
A CBDC for Brazil – The Digital Real
• Extension of the Brazilian real
- Emission by BCB
- Custody and distribution by the payment system
• Retail payments
- On-lineand, eventually, off-line
• Innovative models development
- smart contracts, IoT, programmable money
• Not be interest-bearing
• Guarantee of legal certainty
• Data privacy and security
- Bank secrecy and Brazilian General Data Protection Act
• Preventing and combating money laundering
- Compliance with court orders to track illicit transactions
• Interoperability and integration
- Cross-border payments
• High cyber security
Guidelines:
Next step: Open discussion with society
CBDC
Measures:
• BCB’s S&E Responsibility
• Partnerships
• Policies
• Supervision
• Regulation
Sustainability
Common factors in recoveryMore sustainable and more inclusive growth
More technologyThe epidemic has accelerated technological change
in medicine, education, finance, communication
Low interest rates and high liquidity in the world
There are challenges, but also opportunities to reinvent the economy with private resources
Changes in global value chains
World trade
Vision for the future
Impact of possible reflation global conditions on EMEs
Thank you!
Roberto Campos NetoGovernor of Banco Central do Brasil
June 08, 2021