brics outlook - degroof petercam · pdf fileimportant political events ahead in brics and...
TRANSCRIPT
BRICS outlook - overview
• Brazil • Russia • India • China (see here for recent update) • South-Africa
2
July ‘18
•General election (Mexico)
Aug ‘18
•Official start election (Brazil)
Oct ‘18
•1st & 2th round (Brazil)
Nov ‘18
•ASEAN summit
Nov ‘18
•New CB governor (Mexico)
Nov ‘18
•General election (Thailand)
Nov ‘18
•General election (Chile)
H1 ‘19
•General election (S.Africa)
Nov ‘19
•Legislative election (Poland)
Nov ‘19
•General elections (Turkey)
Jan ‘18
•Presidential election (Czech R.)
March ‘18
•Presidential election (Russia)
March ‘18
•Leadership transition incl. PBOC (China)
March ‘18
•Legislative election (Colombia)
March ‘18
•General election (Malaysia)
April ‘18
•ASEAN summit
April ‘18
•General election (Hungary)
H1 ‘18
•Legislative elections (India)
May ‘18
•Presidential election (Colombia)
June ‘18
•Regional elections (Indonesia)
Important political events ahead in BRICS and other EM
4
Brazil - Conclusion
• The Brazilian economy is leaving recession driven by a more optimistic consumer, with confidence indicators pointing to more good news ahead.
• Despite the recent improvements, there is much slack left in the economy and wage growth
remains modest. • The disinflationary period is over, with inflation moving towards target and inflation
expectations well anchored. • The current monetary policy stance is very accommodative with SELIC at historical low. • On the contrary, fiscal policy needs to be tightened to avoid an unsustainable path, which
will be challenging considering the upcoming elections.
18
… to lower the budget’s oil & gas dependence (~ Dutch disease)
• Mechanism to save difference between actual and projected revenues • Excess revenues are used to buy FX with proceeds deposited in Reserve Fund
(actual oil price >$40 pb) • Shortages are withdrawn from Reserve Fund (actual oil price <$40 pb) • Primary structural deficit should be ≤ 0%
34
Russia - Conclusion
• The Russian economy is recovering from a long but shallow recession, supported by efforts to shift the economy away from the energy sector.
• Consumption growth is gradually improving, although investment activity indicators
remain sluggish. • Wage growth remains constrained and volatile food prices put downward pressure on
consumer prices. In this context monetary policy remains supportive. • The fiscal constraints will be challenging given demographic headwinds, despite measures
that increase fiscal discipline and lower the impact from the energy sector.
35
India - Conclusion
• The Indian economy is positioned on a high growth trajectory, with drastic reforms such as demonetisation and Goods and Services Tax reform (GST) weighing on ST growth.
• Consumption growth is main driver of recovery with investment activity, industrial
production and net exports improving more recently. • With inflation moving higher, the RBI is expected to remain on hold for now.
• Fiscal outlook is set to improve following ambitious reforms, as is the LT growth potential.
48
South Africa - Conclusion
• Despite the global cyclical recovery, the growth outlook in S.Africa remains subdued. • Consumption growth remains modest and current political environment seems to be
weighing on confidence and investment. • Levels of external debt remain high, contributing to the CA deficit
• Inflation remains moderate and close to target while inflation expectations are anchoring
higher, prompting the SARB to be patient and cautious.
• The general election in H1 2019 will be closely watched, as structural problems need to be addressed and the traditional political landscape could fundamentally change.
65
BRICS outlook - Conclusion
• The Brazilian economy is leaving recession strongly on a disinflationary trend, with fiscal outlook and election biggest uncertainty
• Russia is set to grow with a reduced dependency on oil, struggling with fiscal constraints
and demographic headwinds in the LT • India is on one of the highest growth trajectories of all EM, with ambitious reforms weighing
on short-term growth while increasing LT growth potential • China (see here for recent update) • South-Africa risks missing out of global upswing on the eve of important elections that
could address its structural problems such as inequality
66
Contact
Michiel Verstrepen Economist
Bank Degroof Petercam
Tel.: +32 (0)2 662 81 32
Follow our blog posts at blog.degroofpetercam.com
Follow me on Twitter: @michielverstrep
Discover our website at www.degroofpetercam.com
67