An economic endurance test
The Rio de Janeiro Olympic Games represent a considerable achievement in the face of adverse economic developments, political uncertainties and – as if that weren’t enough – the spread of the zika virus. As impressive as this feat is, the country is taking on an even bigger challenge proving its resilience in steering toward recovery and stable future growth.
20 years of lively growth
The country’s macroeconomic policy management proved itself when put to the test by the global financial crisis, with GDP declining by only 0.6% as opposed to the international average of 1.9%. The middle class has continued to grow over the years as social mobility has steadily increased.
Starting in 2014, the drivers behind the expansion – above all, commodity prices – began to weaken, sending the economy into a protracted recession that continues today. Brazil's GDP declined by 5.45% in the first quarter of 2016 in comparison the same period in 2015 (source: IBGE). This represented a slight improvement over the fourth quarter of 2015 (a 5.9% fall) and beat market expectations of a 6% drop. It was the eighth consecutive quarter of contraction. To place this in perspective, the annual GDP growth rate in Brazil averaged 2.78% from 1991 to 2016, reaching an all-time high of 10.1% in the first quarter of 1995 and a record low of -5.9% in the fourth quarter of 2015.
Despite the current downturn, investments in infrastructure, power generation and urban development remain strong economic drivers. Facilities and infrastructure for the 2014 World Cup football championships and the 2016 Olympic games combined are expected to total more than €35bn. Especially in the case of the Rio de Janeiro Olympics, construction projects like new public transport lines and sports facilities will provide lasting benefits to society and can be expected to support recovery and future steady economic growth.
Challenges and opportunities for insurers
Munich Re is commited to the Brazilian market since many years
Munich Re is convinced of Brazil’s mid- to long-term potential for sustainable economic development and is dedicated to supporting primary insurers and industry players in projects that respect the environment and benefit society. When the excitement of the Olympic Games is over and the international media spotlight moves on to the next big thing, we will still be there as a strong and knowledgeable partner.