Economic Indicators for Brazil
Brazil is one of the countries know across the world because of its large economic size making it among the top middle-class economies. The economy is the largest in the Latin America and the enormous and growing population makes the economy be one of most progressive (Sullivan & Sheffrin, 2003, 462). . Brazil survived the recent economic crisis reported consistent growth in GDP over the crisis period. In evaluating the performance of the economy, a number of indicators are out into consideration. These factors include the GDP, GDP per capita, inflation, capital flow, the population foreign exchange reserve and unemployment among others that are out into perspective in this paper.
The Gross Domestic Product
The gross domestic product is the market value of the finished and final goods and services within a given period, which is mostly one year. The GDP is the measure of the economic output of all the activities within a country. GDP is a primary economic indicator in many economies across the world. Every government, policy makers and economic planners are keen to ensure that the GDP level grows from one year to the others. The improved GDP is a sign of successful management of economic resources and activities (Fioramonti, 2013). In the attempt to improve the GDP, an economy succeed in containing the inflation rates and leads to improved employment.
The strength of an economy is measured by value of the GDP. The GDP in Brazil in 2013 was $ 2245.67 billion, which represents 3.63 % of the world economy. The economy is considered as the world’s 7th largest and the leading in Latin America. The GDP in the economy reached its all time best in 2012 at $ 2, 476.69 billion from $ 882 in 2006. From 2006, the GDP had grown tremendously and consistently except in 2008 when the value declined slightly by more than 4 % (Trading Economics, 2015 e). The decrease in the GDP during the year is associated with the economic crisis experienced in the rate 2000s. The GDP expanded by 0.1 % in the third quarter of 2014 after the first – half’s contraction. The growth during the year was associated with the increased spending in stimulus program to boost the performance of the economy. The government expenditure increased by 1.3 % percent. The increase in government spending is an expansionary move through, which demand goods and services increases. The increase in demand encourages the firms and individuals the increase their output levels to serve the larger market.
The growth in the GDP is a positive development for an economy. The strength of the GDP should be evaluated to determine whether it has a greater or less impact on the individuals within the economy. The GDP per capita in Brazil was $ 5, 823.04, which is an increase from $ 4739.31 in 2006 (Trading Economics, 2015 d). The trend implies that despite the growth in population, the economy has been able to utilize the available resources for an increased production of goods and services by individuals in the economy. The increase in the per capita is a sign of improved standard of living to the Brazilians because the figures are inflation adjusted. The following figures shows the trend in the GDP figures
Available at: http://www.tradingeconomics.com/brazil/gdp
The growth in GDP
Available at: http://www.tradingeconomics.com/brazil/gdp-growth
The GDP per capita
Available at: http://www.tradingeconomics.com/brazil/gdp-per-capita
The interest rate
The interest rate in an economy is the other important indicators to put into consideration. Interest rates in Brazil are set by the central bank, which has the mandate to act on behalf of the government in that perspective. The interest rates are applied to either expansion or contraction in the economy. The interest rates set by the central bank has a great impact on individuals and the economy at large. From the particular point of view, the interest rates affect the purchasing power by either increasing the amount used for the repayment of credits and the serving of the mortgages. An increase in interest rate implies that the interest charged on the amount borrowed. The whole economy is affected either directly or indirectly. The increase in interest rate leads to decreased number of investors seeking funding from financial organization due to the increase in cost of capital (Brezina, 2012, 58). The decline in new or additional investment leads decreased growth in output and employment. In other case, the producers tend to raise the price of goods and services to cover the increase in the cost of capital and operations. The increase in the cost of goods in a persistent manner as a result of the change in interest rates leads to growth in inflation.
The interest rate in Brazil is currently at 12.765 %, which is a decline from 18 % in 2006. The historic high of the rate was in 1999 at 45 % while in the year 2013 it was about 7 %. The current rate of 12.75 % was an increase from 10 % in January 2014 (Trading Economics, 2015 c). The central government through its policy makers reached the decision in the attempt to address the problem of the stubbornly high inflation experienced in the economy. The increased interest rate discourages borrowing and encourages individuals and firms to save money into deposit account. The result of the situation is that the purchasing power decreases, decreasing the demand for goods and services and hence the inflation rate tend to slow down. The move by the central bank can be a potential factor that can affect the performance of the economy due to the reduced investment.
Available at: http://www.tradingeconomics.com/brazil/interest-rate
Unemployment is a situation where individuals who are able and willing to work are in search of opportunities, but in vain. The unemployment is brought about by a large number of the people with the ability and will work, but the opportunities available are limited. Unemployment is a negative economic indicator because of the adverse implication it has on the economy. A high unemployment level implies that the economy underutilizes its labour as one of the key factors of production. The failure to utilize a labour is an indication that the potentials of the economy are underutilized. The high number of unemployed particularly the youth is a threat to the socials and civil stability as the idle educated can be attracted into crime and substance abuse. In addition, having a large number of unemployed implies that a large number of people depend on the output from a few workers leading to increased poverty in the economy and societies (Layard, Nickell & Jackman, 2005). However, economists are in support of a certain unemployment level in an economy. The key reason given for the support of the certain unemployment level is that it assists in establishing the cost of labour to favourable levels.
The importance of unemployment enticed the analysis of the trend in Brazil. The unemployment rate in Brazil increased to 5.3 % in January 2015, compared to 4.2 % in December 2014. The average unemployment from 2001 until 2015 is 8.44 % while the highest during the period was at 13.1 % in August 2003. The unemployed number increased by 237 thousand from December 2014 to January 2015, making the total to 1.28 million. The number of employed persons declined by 220 thousand to 23 million while the number of underemployed was 347 thousand (Trading Economics, 2015 g). The unemployment rate in the economy has always been less than 10 %, which is a commendable level. Importantly, it is clear that the there has been a general decline in the unemployment level from 2006 which despite the fluctuations in the rates.
The unemployment rate graphs
Available at: http://www.tradingeconomics.com/brazil/unemployment-rate
The population in an economy is an important indicator that economists and government are increasingly becoming keen to look at. The performance of an economy depends heavily on the size and quality of the people in the population. Economies with a large population are considering the number as the source of wealth and prosperity. Through the population, the economy has the source of labour and market for the finished goods and services. Economy whose population has been increasing over the years have taken the advantage of the cheap labour to encourage internal and external investment. The increased investment from both the internal and internal sources are also used a source of employment for the large population.
The popular in Brazil is one of the key factors that have assisted in growing the economy to its current state. The population in the country was at a record of about 202. 6 million people in the year 2014. This has been an increase from 72.7 million in 1960 to 185.15 in 2006 and then to the current totals of more the 202 million. The population of the country is about 2.85 of the total population while in every 35 people on earth 1 is a resident of Brazil. Brazil is, therefore, the host to a large portion of the total human population making it an important economy in the world map (Trading Economics, 2015 h). The large population in the economy is an indication of the improved standard of living making life more comfortable and favourable to conception, growth and development. The population grows with the improved health care and affordability of goods and services. In addition, the growth of the population is in line with the growth in the GDP per capita and hence it is a proportionate growth. The simultaneous growth in GDP and the population over the years suggested that each of the indicators supports and influences the trend in the other.
The trend in population
Available at: http://www.tradingeconomics.com/brazil/population
An economy involves the utilization of scarce resources to produce goods and services that are used to satisfy the human needs. The efficient allocation and efficiency utilization of goods and services is an essential growth factor to and economy. Efficient allocation of the resources implies that the best areas of allocation are given the priority. Efficiency suggests that the allocated resources are utilized as planned with little or no wastage (Mankiw, 2009, 74). An economy that failures to use the resources in the right matter is said to be unproductive and can hardly report significant growth. High productivity implies high quality and quantity of goods and services for the benefit of a larger population in the economy.
The productivity in Brazil is currently at 140.61 index points. The productivity level implies that the value of resources involved in the production of goods and services is increased by about 40.61 %, which is a commendable performance. The productivity level can be associated with factors such as adaptation of modern technology and highly qualified individuals and systems that avoid wastage and enhance efficient allocation of resources. The current productivity level is an increase from about 90 in 2006, but a decline from about 170 in 2014 (Trading Economics, 2015 i). The productivity in 2014 can be associated with the effect of the massive demonstrations and protests, which reduced the number of resources committed to the production of goods and services.
Available at: http://www.tradingeconomics.com/brazil/productivity
Inflation rate is the persistent increase in the price of goods and services in an economy. Inflation is one of the economic factors that many governments through various agencies and policy makers strive to maintain at the favourable. The implications of the high rate of inflation are costly because of many indicators that are affected. In addition, inflation is one of the indicators that a lot of time and strategies are required to contain at favourable levels. Inflation leads to increased cost of production as a result of the increased cost of raw materials. This can discourage production particularly when it is impossible to pass the cost to consumers. The reduced production reduces the employment opportunity and hence the unemployment rate increases (Bernanke, 2001, 46). In addition, the cost of living increases, while the living standard declines as the consumers can only afford less than before.
The inflation rate in Brazil is currently at 7.7 % as per the rate in February 2015l; an increase from 5.8 % in January. It is also important to state that the inflation rate has reached its highest point in February since January 2006 when it was around 5.8 % (Trading Economics, 2015 f). The increase in the inflation rate in the early 2015 has been brought about by the efforts by the government to increase taxes to cover the budget deficit. The increase in taxes leads to the increase in services such as transports and electricity forcing the consumers to spend more.
Available at: http://www.tradingeconomics.com/brazil/interest-rate
Foreign exchange reserve
Economies across the world are increasingly becoming interconnected with the increased globalization and regional integration. International trade involves the purchase and sales of goods and services across the borders. The exchange rate of the currencies of the countries concerned plays a significant role in the determination of the price and costs of the goods and services. The central bank holds a certain amount of foreign currencies particularly the US Dollar that is used in many countries for price quotations. The central bank holds foreign currency in terms of banknotes and foreign bank deposits to assist it in controlling the exchange rate brought about by the demand and supply of the currencies. The amount of the research assists the central banks to control the import and export levels to favourable levels. For example, when the imports increase beyond the wanted levels, the central banks hold more of the foreign currencies (Banting, Sharpe & St-Hilaire, 2001, 67. The move denies the traders and imports the opportunity to have an increased amount to purchase goods and services from other countries. The reduced amount of available foreign currency makes the cost of importing the products and services high and the import levels are likely to decline to the preferred levels.
The foreign currency reserve has been an essential tool used in Brazil to protect its local industries against the competition from imports. The reserve has had an upward growth over the years to the current $ 379, 156.5 million. The current reserve amount has increased from $ 50, 000 million in 2006, which is an increase of more than seven times (Trading Economics, 2015 b). The trend implies how significant the central bank uses the reserve to smoothen the foreign trade and affairs.
The trend in foreign exchange reserve
Available at: http://www.tradingeconomics.com/brazil/foreign-exchange-reserves
Trading across the borders involves the purchase and sale of goods and serves, in terms of import and export between the countries concerned. The trade balance is the difference between the value of exports and imports. When the value of exports surpasses the value of imports, the trade balance is said to be at favourable levels. A negative trade balance or the trade deficit occurs when the value of imports surpasses the exports (Brux, 2011, 272; Kumar, R, 2008, 282). A country with a trade surplus over the years can have its GDP Growth at favourable at stable levels. The trade surplus implies that the company has an opportunity to build its local industries to supply the required goods and services for both the domestic and foreign markets.
Brazil has been one of the few economies across the world with a continuous record in trade surplus. Since 1959, the economy has had a trade balance at an average of 629.35 million. The all time high in trade surplus is $ 5659.37 million in 2006 but recorded the lowest point in January 2014, at – $ 4, 058.14 million. Brazil trade deficit increased to $ 2.84 billion in February from the $ 2.12 billion in January 2015. A drop in key export prices lead to the shrinking of the sales value; soybeans and iron ore among other products lead to the decline in sales. The first annuals trade deficit in the economy since 2000 was reported in 2014. The deficit can easily be associated with reduced productivity and GPD during the year. In addition, the increased public protest and demonstration during the year declined.
Available at: http://www.tradingeconomics.com/country-list/balance-of-trade
The capital flow
The capital flow is a measure of the amount of investment moving in and out of the people. An economy that attracts huge amount of foreign direct investment is able to exploit it economic resources and proper to great heights. The highest capital flow in Brazil was at $ 16, 812.7 million in March 2011, while the lowest point was in 1998 at – $ 16, 639.2 million (Trading Economics, 2015 a). The increase in 2011 was associated with the continuous growth in the GDP during the years when many economies across the world experienced economic crisis. Investors from other countries found the economy to be favourable in terms of the rate of returns, enticing them to commit their capital to the economy.
Available at: http://www.tradingeconomics.com/brazil/capital-flows
In conclusion, the management of an economy is a complicated affair that the government has to fulfil for its people. To manage the economy effectively, the government through various agencies and policy makers analysis the economic indicators and develop strategies to assist in boosting the economic performance. All the indicators including the GDP, the inflation rate, interest rates, unemployment and trade balance among others should be maintained favourable levels. The economic indicators affect each other either positively or negatively making and hence the individuals involved should be keen to strike a balance. For example, when the inflation rates are high, and the government intends to reduce it, the interest rates are increased by the central bank. The increase in the interest rates discourages borrowing and investment, which eventually lead to slowed growth in GDP and decrease in employment opportunities.
The Brazil’s economy is one of the models that many developing economies admire. The economy is among the developing economies whose indicators are positive and appealing. The growth in GDP, GPD per capita, the capital flow and foreign exchange rates are the key indicators of how healthy the economy has been over the years. The economy survived the 2000s economic crisis due to the application of policies that protected local industries and business from the adverse externals forces. The government has taken advantage of the growth in population and availability of natural resources to attract foreign investors to various sectors of the economy. The increased investment increases the productivity and output. The protection against competition from foreign products and excessive production has enabled the GDP to grow to the current levels.
List of References
Banting, K, G, Sharpe, A., & St-Hilaire, F, 2001, The review of economic performance and social progress. Montreal [Que.], Institute for Research on Public Policy.
Bernanke, B, 2001, Inflation targeting: lessons from the international experience. Princeton, NJ [u.a.], Princeton Univ. Press.
Brezina, C, 2012, Understanding the gross domestic product and the gross national product. New York, NY, Rosen Pub.
Brux, J, M, 2011, Economic issues and policy, Mason, OH, South-Western Cengage Learning.
Fioramonti, L, 2013, Gross domestic problem: the politics behind the world’s most powerful number. London, Zed Books.
Kumar, R, 2008, International economics, New Delhi, Excel Books.
Layard, P, G, Nickell, S, J, & Jackman, R, 2005, Unemployment: macroeconomic performance and the labour market. Oxford, Oxford Univ. Press.
Mankiw, N, G, 2009, Principles of economics. Mason, OH, South-Western Cengage Learning.
Sullivan, A, & Sheffrin, S, M, 2003, Economics: Principles in action, Upper Saddle River, New Jersey Pearson Prentice Hall.
Trading Economics, 2015 a, Brazil Capital Flows, available at: http://www.tradingeconomics.com/brazil/capital-flows
Trading Economics, 2015 b, Brazil Foreign Exchange Reserves, available at: http://www.tradingeconomics.com/brazil/foreign-exchange-reserves
Trading Economics, 2015 c, Brazil Interest Rate, available at: http://www.tradingeconomics.com/brazil/interest-rate
Trading Economics, 2015 d, Brazil GDP Available at :http://www.tradingeconomics.com/brazil/gdp
Trading Economics, 2015 e, Brazil GDP per capita, Available at: http://www.tradingeconomics.com/brazil/gdp-per-capita
Trading Economics, 2015 f, Brazil Inflation Rate. Available at http://www.tradingeconomics.com/brazil/inflation-cpi
Trading Economics, 2015 g, Brazil Unemployment Available at: http://www.tradingeconomics.com/brazil/unemployment-rate
Trading Economics, 2015 h, Brazil Population, Available at: http://www.tradingeconomics.com/brazil/population
Trading Economics, 2015 i, Economic productivity Available at: http://www.tradingeconomics.com/brazil/productivity