CNI alerts that restoring confidence in the economic policy and increasing competitiveness is decisive for the country to speed up its growth pace.
Brazil’s economy will grow by 1% in 2015, above the 0.3% projected for this year. The industry, which is estimated to close 2014 with a 1.5% retraction, will have a 1% expansion. The forecast is in the Economic Report – Brazil’s economy, a newsletter published on this Tuesday, December 16th, by the National Confederation of Industry (Confederação Nacional da Indústria -CNI). "Restoring the confidence in the economic policy, especially in what regards the fulfillment of the fiscal target, as well as the prices and exchange rate realignment, will reestablish the necessary signs from the market to boost the production agents’ confidence. Based on that, we projected the recovery of the industry production and investments for the second half of the year”, says the document.
In CNI’s assessment, the interest rate increase and the effects of the fiscal adjustments will hold up consumption and investments. The expectation is that households’ consumption grows only by 0.7% in 2015, half of what was estimated for 2014. After the estimated drop of 6.7% this year, the investments will remain stagnant.
The study also projects a fall of the exports amount, due to the reduction of international prices, mainly for commodities. "The trend is that price decrease is higher than the increase of exported volume and therefore exports decrease by 2% in 2015, to US$ 219.5 billion. Imports will account for US$ 212 billion, 7% lower than in 2014. The trade balance, therefore, will be positive in US$ 7.5 billion.
INTEREST AND EXCHANGE RATES – The study points out that the focus of the economic policy in the next year will be on the recovery of the fundamentals and stability. It is estimated that the government reaches the target of 1.2% primary surplus by controlling expenses and recomposing the revenues through the elimination of some tax exemptions. Therefore, the nominal deficit may fall from 5.4% to 4.2% of the Gross Domestic Product (GDP). The net debt will be equivalent to 37.6% of the GDP.
The interest rate will continue going up and may close 2015 at around 12.5% yearly, higher than the 11.75% in 2014. Inflation will be maintained at 6.2%, almost at the upper inflation target limits, but below the 6.4% which was estimated for 2014. Moreover, CNI believes that the trend of Brazil’s real devaluation in relation to the dollar will be maintained in the next year. The dollar rate in December, 2015, will be R$ 2.70, with an average R$ 2.60 yearly.
GROWTH STRATEGY – According to the study, after the frustrating performance of the economy in 2014, Brazil has two challenges to face: restore the macroeconomic fundamentals and increase competitiveness. “There is no choice between these two goals. Both are essential for the recovery of sustained growth”, CNI recommends.
The reestablishment of the economic fundamentals depends on a fiscal adjustment that allows for the generation of consistent surplus and the control of the public debt. It is necessary to break the inflationary estimates and reach inflation targets, re-balance the external accounts and recover the competitiveness of Brazilian products.
Moreover, CNI highlights that the competitiveness increase depends on restoring the economic agents’ confidence, increasing investment rates, reducing production costs and creating a more business-friendly environment, with quality regulation and legal safety. This also involves approaching tax reform, by simplifying taxes, cutting red tape, creating long-term financing mechanisms, modernizing labor relations and reducing investment costs
