Macroeconomic Scenario - Horizon 2026

Periodically the Economy and Energy – e&e presents a growth scenario forecast. The so-called Reference Scenario corresponds to following the observed trends. This means that the evolution of the parameters that determine growth tend to maintain the historical behavior but takes into account what happened in the last years.

The results of the two previous projections (eleven and six years ago) presented results that are rather satisfactory. Particularly, the GDP projections for the 1993/2003 period corresponded almost exactly to the actual growth.

The present publication corresponds to the “run” using data available for 2005. A revision is under way considering the results of studies about the historical behavior of the main parameters used in the GDP projection.

This presentation does not aim at discussing the methodology adopted or the projection procedures that have been previously described in this publication. The objective is to present the results. A description of the program and projections of the previous run is available at the Internet (http://ecen.com/eee19/ecen19.htm).

The Reference Macroeconomic Scenario was generated by the projetar_e computer program. In what follows we present the spreadsheets produced by the program. The data permit to view the main adopted premises and the results obtained. The screens shown also permit to reproduce the scenarios created to be used in projections such as energy demand.

The values of the internal savings relative to the GDP were obtained from the GDP less the apparent consumption, that is:

The projection values were obtained by fitting the historical data and considering a limit of 30% of the GDP regarding the internal savings in the long period and 26% of the GDP in 2025. The time constant for connecting the fitting and the historical data is 3 years.

It should be noticed that there has been a considerable increase in the territorial savings that represents internal investment. This savings has undergone a considerable decrease due to the Real Plan and it has recovered in the last years.

It was assumed that this ratio (the inverse of capital productivity) has remained at the same level in the last years (about 2.7). This ratio indicates the quantity of capital goods units necessary for producing a product unit. In the present case, in order to produce US$ 1000 it is necessary US$ 2,700 of capital goods on the average.

The Brazilian External Trade (average value of exports and imports shares in the GDP) would maintain its growing trend, but its share in the GDP would be reduced in the next years following the historical behavior.

The Commercial Balance would remain positive but would be reduced in order to permit larger investments, stabilizing at 2.5% of the GDP; external transfers (relative to real goods) would be 1.4% of the GDP. This means an external (negative) investment of – 1.4% of the GDP.

As a result, one would obtain the investments shown on the following screen. It should be noticed that the internal savings recovery has not yet produced the expected investment recovery. For this purpose it is necessary to reduce the transfer of real resources abroad.

For external transfer regulation it was assumed as a limit to the net external assets 25% of the total capital stock or about 68% of the GDP for a K/Y (capital/product) ratio value of 2.7.

In order to maintain this limit, it is necessary to produce surpluses (practically, by restraining internal consumption) and to maintain the remuneration of external capital within reasonable limits (in the case, they were maintained in the last 7 years at 8% of real interests and 4% of capital remuneration). Higher rates need higher transfers abroad which undermines investment and economic growth. It should be observed that that the remuneration rates of productive external capital are calculated using data from legal remittance of dividends and of other capital remunerations.

The utilization factor measures the utilization of the production capacity and it was supposed that it would return to the historical average value (indicated in the secondary axe) of 100%. It is also indicated the relative value of maximum utilization. This factor, as shown in the figure, is strongly influenced by the conjuncture. The program permits to formulate hypothesis for the first years, as indicated in Screen 7. In this projection the values projected by the program were maintained.

Reference Screen 7: Utilization factor of the production capacity relative to the maximum and average levels.

	Reference Scenario
Variable	Unit	2005	2006	2007	2008	2011	2016	2021	2026
GDP	US$bi 2003	531	552	573	592	651	790	992	1264
Variation	% p. a.		3.9%	3.8%	3.3%	3.3%	4.0%	4.7%	5.0%

Capital/Product Ratio		2,64	2,60	2,57	2,57	2,62	2,67	2,67	2,67
Investments	US$bi 2003	103	115	125	132	152	189	242	314
Variation	% p. a.		11.7%	9.1%	5.6%	4.9%	4.4%	5.1%	5.3%

External Trade [(X + M)/2]	US$bi 2003	65	67	70	71	74	88	114	150
Exports	US$bi 2003	80	81	81	81	82	98	127	166
Variation	% p. a.		1.4%	-0.1%	0.5%	0.2%	3.7%	5.2%	5.5%
Imports	US$bi 2003	50	54	58	61	66	78	102	134
Variation	% p. a.		7.7%	8.6%	4.4%	2.6%	3.6%	5.4%	5.7%
Commercial Balance	US$bi 2003	30	28	23	21	16	20	25	32

Goods and Services Non Factors
Exports BSNF	US$bi 2003	108	95	95	95	96	115	148	194
Imports BSNF	US$bi 2003	80	73	78	81	79	95	123	162
Transfers Abroad	US$bi 2003	28	22	17	14	9	11	14	18

Apparent Consumption *	US$bi 2003	400	415	431	445	489	590	736	932
Population	Million inhab	184.2	186.8	189.3	191.9	199.3	210.7	221.1	230.7

Per capita consumption	US$2003/inhab	2172	2224	2277	2321	2456	2803	3331	4041
Variation per capita consumption	% p. a.		2.4%	2.4%	1.9%	1.9%	2.7%	3.5%	3.9%
Per capita GDP	US$2003/ inhab	2882	2954	3026	3084	3266	3751	4487	5478
Variation per capita GDP	% p. a.		2.5%	2.4%	1.9%	1.9%	2.8%	3.6%	4.1%

FBCF	US$bi 2003	103	115	125	132	152	189	242	314
Territorial Savings	US$bi 2003	131	136	142	146	161	200	256	331
Transfers Abroad	US$bi 2003	28	22	17	14	9	11	14	18
Commercial Balance	US$bi 2003	30	28	23	21	16	20	25	32
Non Factors Serv. (net.)	US$bi 2003	-2	-6	-6	-6	-7	-9	-11	-14

The results of the adopted premises (and of other endogenous variables) permit to extrapolate the growth of the product that can be used in other applications such as projection of energy demand. The program permits to choose the currency in which the results will be presented. The 2003 dollar was chosen for presenting the results. The main scenario data are summarized in Screen 9.

The program and the methodology used in the projections are a result of the model described in the book “Brasil: o Crescimento Possível” , published in 1996 using data until 1993. At the time, opposing the predominant optimism, a 3.5% limitation on the growth rate from 1993 to 2003 was adopted. The hypotheses were considered pessimistic because it was presumed that Brazil was entering a virtual circle of growth due to the economic liberalization.

The result of the Real Plan that was then launched (in terms of real growth of the economy) did not come up to expectations. A gap of 6% of the GDP in the internal savings was created. Even with incoming of external resources, about 2% of the GDP, it was not possible to re-establish the previous investment rates that have decreased 4%.

From 2000 on, a painful reversal of the consuming trend generated by the Plan was started. This caused an increase in the internal savings. Furthermore, in the nineties the capital productivity decrease of the previous decades was interrupted. As a result, this is the first time that the program’s reference scenario presents the possibility of growth above 4%. In the next years, the lack of investments caused by the remittance of resources abroad will be felt and it must be reduced so that growth can be resumed. Therefore, in the present forecast only from 2016 on a sustainable growth above 4% will be possible.

Therefore, the analysis made points out to growth that fall short of the national expectations. The following article starts a series of notes in which it is tried to study the evolution of the main parameters that, in the approach adopted here, determine growth. The objective is to define the conditions in which a scenario of larger growth would be possible.

Periodically the Economy and Energy – e&e presents a growth scenario forecast. The so-called Reference Scenario corresponds to following the observed trends. This means that the evolution of the parameters that determine growth tend to maintain the historical behavior but takes into account what happened in the last years.

Internal or Territorial Savings:

The values of the internal savings relative to the GDP were obtained from the GDP less the apparent consumption, that is:

Limits to External Assets

For external transfer regulation it was assumed as a limit to the net external assets 25% of the total capital stock or about 68% of the GDP for a K/Y (capital/product) ratio value of 2.7.

Reference Screen 7: Utilization factor of the production capacity relative to the maximum and average levels.

Editorial :

The e&e Organization

Internal or Territorial Savings:

Limits to External Assets