The re-growth of the Brazilian economy depends on rebalancing the accounts in 2019.

TM Law and Kennedys received the Brazilian Insurance Market leaders in an event held in São Paulo last week, to discuss the current economic situation and perspectives for the next years.

Fabio Torres and Alex Guillamont

The country begins to exit the recessive cycle that made GDP stagnate for a year and drop for the past two consecutive years. The most reasonable prediction is that the deficit will remain throughout the Michel Temer government. A well-respected economist from a main -newspaper in Brazil who spoke in the event, confidently affirmed that this year the deficit would shrink 2.6% of GDP, next year 2.1, then down to 1.36% of GDP and promises to zero out after they end their office in 2019.

The country begins to exit the recessive cycle that made GDP stagnate for a year and drop for the past two consecutive years. The most reasonable prediction is that the deficit will remain throughout the Michel Temer government. A well-respected economist from a main TV channel in Brazil who spoke in the event, confidently affirmed that this year the deficit would shrink 2.6% of GDP, next year 2.1, then down to 1.36% of GDP and promises to zero out after they end their office in 2019.

The economic activity is stabilizing, and next year inflation will be lower and will improve slowly. However, the primary deficit will only reach zero % in 2019, and that is only if all projects and spending change limitations are approved.

“Brazil will have surplus only in 2020, which means that the debt that is high today, with 68% of GDP, will keep rising. What will bring calmness is that the trend is going towards the reduction and that the reforms will guarantee it”, confirmed the journalist.

Even though the worst is behind us, the best will come slowly. Petrobras, the largest investor company in the country, is reducing its projects and cutting costs. For instance, Petrobras will continue the investment in a more conservative way, for example, whereas they would have spent BRL 200 billion to open refineries in the past, now they will seek to do such projects with only BRL 70 billion.

In order to grow, Brazil needs inflation to fall drastically, to reduce the interest and taxes, and most of all increase the confidence of the private sector to participate further in this investment effort.

The economic activity is stabilizing, and next year inflation will be lower and will improve slowly. However, the primary deficit will only reach zero % in 2019, and that is only if all projects and spending change limitations are approved.

“Brazil will have surplus only in 2020, which means that the debt that is high today, with 68% of GDP, will keep rising. What will bring calmness is that the trend is going towards the reduction and that the reforms will guarantee it”, confirmed the journalist.

Even though the worst is behind us, the best will come slowly. Petrobras, the largest investor company in the country, is reducing its projects and cutting costs. For instance, Petrobras will continue the investment in a more conservative way, for example, whereas they would have spent BRL 200 billion to open refineries in the past, now they will seek to do such projects with only BRL 70 billion.

In order to grow, Brazil needs inflation to fall drastically, to reduce the interest and taxes, and most of all increase the confidence of the private sector to participate further in this investment effort.