2014 World Cup: more inflation than growth for Brazil

6/6/2014 - Report
ic_blogtagEconomic OutlookBrazilGross Domestic Product (GDP)GrowthInflationReformsSocial Unrest
Neither the World Cup nor the Olympic Games will boost Brazil's economy. EH expects growth to remain low at +1.8% in 2014 and +2.1 % in 2015. We estimate these sporting mega events to add, at best, +0.2pp to real GDP growth in 2014 and less than +0.1pp on average per year in 2015-2016.

However, additional inflationary pressures are apparent. Inflation is expected to remain high at +6.3% in 2014 and +6.1% in 2015. More than +0.5pp of the annual inflation of 2014 is to be explained by the mega-events. This bullish effect on prices is to remain strong thereafter (+0.4pp per year in 2015-2016). Even if it begins to diminish after the Olympic Games, it may not disappear before 2020 given the inertia of price increases.

The mega events have highlighted the inherent weaknesses of the Brazilian economic model. On the back of growing social discontent generated by the surge in inflation, this could be the catalyst for economic policy reforms as presidential elections are taking place in October.

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2014 World Cup: more inflation than growth for Brazil - Report