Economy & Energy
Year IX -No 55:
April
– May 2006   
ISSN 1518-2932

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Growth of Methane Concentration in the Atmosphere

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Results of Macroeconomic Reference Scenario

Macroeconomic Scenario - Horizon 2026

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Text for Discussion:

Macroeconomic Scenario - Horizon 2026:

  Results for the Reference Scenario

Introduction

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).

 

Reference Scenario

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.

 Internal or Territorial Savings:

Reference Screen 1: Internal Savings

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

Internal Savings/GDP = 1 – Apparent Consumption/GDP

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.

 

Capital/Product Ratio:

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.

 

Reference Screen 2: Capital/Product Ratio

Extrenal Trade

Reference Screen 3: External Trade

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.

Reference Screen 4: Exports and Imports

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.

Reference Screen 5:Internal and external investments as a share of the GDP

 Limits to External Assets

Reference Screen 6: Net External Assets

(external debt + sock of direct investments)

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.

Utilization Factor

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.

 

Results for the GDP

 

 

 

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

Reference Screen 9: Reference Scenario

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.

Comments on the Results

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.

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).

Reference Scenario

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.

 Internal or Territorial Savings

Internal or Territorial Savings:

 Reference Screen 1: Internal Savings

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

Internal Savings/GDP = 1 – Apparent Consumption/GDP

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.

 Capital/Product Ratio:

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.

 

Reference Screen 2: Capital/Producto Ratio

External Trade

Reference Screen 3: External Trade

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.

 

Reference Screen 4: Exports and Imports

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.

 

Reference Screen 5:Internal and external investments as a share of the GDP

Limits to External Assets

Reference Screen 6: Net External Assets

(external debt + sock of direct investments)

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.

Utilization Factor

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.

Results for the GDP

Reference Screen 8: Summary of the GDP evolution in the considered scenario

 

 

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

 

Reference Screen 9: Reference Scenario

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.

Comments on the Results

 

Graphic Edition/Edição Gráfica:
MAK
Editoração Eletrônic
a

Revised/Revisado:
Monday, 09 May 2011
.

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