Russian Minister of Finance, Anton Siluanov
Brazil
According to Brazil’s Finance Minister, “Brazil is now growing.” The Minister notes that although the country has “been through some difficult times… the important message is that this recession is over”. Indeed, there is data that supports his view, such as December’s industrial production reading which rose 2.27% on the November reading and 0.8% on the December 2015 reading.
Key Data Points Still Down
However, both industrial and manufacturing production are still only back at 2004 levels while retail sales are down -2% on November’s reading and -6% on December 2015. Similarly, industrial employment has fallen 8% year over year, and the unemployment rate has now reached 12.6%. Furthermore, the primary trade deficit for 2016 is now wider than it was for 2015.
The Finance Minister also noted that he is pleased with how inflation has moderated “which would help to bring interest rates down”. However, so far there appears to be no relationship between the decline in inflation over recent months and the BCB’s monetary policy. Inflation has fallen to 5.4% from prior highs of 9% in August mainly due to the fall in food prices, limited increases in regulated prices for some goods and services and low domestic demand. The BCB’s key rate has no impact over any of these elements.
Structural Reforms Underway
The Finance Minister has also referred to “structural reforms” of which there has been one: the implementation of a cap on spending. As of 2017, spending will not be allowed to grow faster than the inflation rate of the prior year. It is important to note that this rule is not overly prohibitive during times of slowing inflation but should inflation start to rise again, this could become the case.
The second reform – pension reform – is yet to be completed. The current pension regime is deemed too generous and essentially unsustainable. The government is now proposing targeting a minimum pensionable age of 65.
Read more: https://www.orbex.com/blog/2017/03/looking-at-growth-in-russia-brazil/