Abstract
ABSTRACT The article aimed to forecast the Brazilian economy’s growth potential in the 2016-2025 period, assuming the absence of changes in industrial policy. It is based on a formal growth model constrained by the balance of payments (BOP) developed by the authors and disaggregated into three sectors (farming, industry, and services). All its parameters were econometrically estimated, including those of the world economy relevant to the Brazilian economy’s performance. Assuming that the current macroeconomic management “tripod” was maintained in the country, the basic interest rate and exchange rate policy were calibrated to generate the maximum growth rate allowed by the external constraint compatible with the maintenance of inflation in target each year. Forecasts were also made about the performance of the three sectors’ key variables, resulting from such calibration. Forecasted potential GDP and productivity growth were low (even by recent historical standards) and decreasing over time, with slower growth in the industrial sector than in other ones. The results revealed the critical importance of the industrial sector for such performance, suggesting that an efficient industrial policy could significantly increase the Brazilian economy’s growth potential.
Highlights
Since the mid-1980s, the participation of the Brazilian manufacturing industry in the national GDP started to present a major setback
Given the magnitude of the industry price elasticities estimated in this paper, the results suggest that the Brazilian exchange rate appreciations generate adverse effects on industrial growth and the aggregate of the economy only by indirect means, namely, through their effects on the imports of the services sector
Since the “rest of the world” grows 3.72% in the average for the period 2016-2020, which slows to 3.37% in the average for the period 2021-2025, it is undeniable that the aforementioned growth behavior of the Brazilian economy partly follows the growth behavior of the world economy
Summary
Since the mid-1980s, the participation of the Brazilian manufacturing industry in the national GDP started to present a major setback (from 32% in 1986 to 13.2% in the year 2013, according to IPEADATA, 2014).
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