Brazilian January business confidence to be released
The Industrial Entrepreneur Confidence Index in Brazil will be updated today for the month of January.
The index tracks current levels and future expectations of industrial output across Brazilian firms as a predictive indicator of GDP growth. Last month it reached a nine-month high of 63.1—a figure above 50 indicates a positive outlook. This growing confidence has been underpinned by auxílio emergencial (emergency aid), a government program providing cash transfers to the poor, which backstopped consumer demand and saved millions from poverty during the worst of the pandemic-induced economic crisis. The World Bank now predicts Brazil’s economy will grow by 3% this year, 0.8% higher than its June prediction.
With public spending at risk of breaching a constitutionally set limit, economists have repeatedly pointed to structural reforms, not fiscal policy, as the primary driver of growth. Proposed changes to the business environment include import tariff reduction, loosening of rules on private investment and simplifying the tax code. Progress in these areas has been uneven thus far in the face of mixed political appetite and resistance from entrenched business interests. Expect a renewed push from the Bolsonaro government to achieve structural reform in the short-term to spur growth as emergency aid programs expire with the new year.
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