BMI View: Brazil's vast presalt reserves suggest substantial growth potential over the long term,underpinning our view that crude, natural gas, and other liquids output will rise through 2026. However,production growth will be tempered by declining investment funds from Petrobras, potential fallout from thecorruption scandal and a still challenging policy-making environment.
Latest Updates And Key Forecasts
On August 11, Brazilian national oil company (NOC) Petrobras posted a profit of BRL4.8bn over H117.This compares to a loss of BRL900mn in H116. Profits were driven by a growth in domestic output ofcrude and natural gas which reduced import costs of both goods while increasing crude exports by 69%y-o-y. We have long held that the more pragmatic approach spearheaded by CEO Pedro Parente wouldusher in a more stable financial period for the embattled NOC.Brazil's economy will stage a modestrecovery in 2017, emerging from a recession that began in Q214. Investment will drive the recovery, asbusiness sentiment improves in light of decelerating inflation and more business-friendly policies.
However, the recovery will be constrained by substantial slack in the economy, including a large outputgap and still-elevated unemployment. We have downgraded our forecast for growth in 2017 to 0.5%,from 0.8%.