BRAZIL-ECONOMY/GDP Brazil economy sinks into worse-than-expected recession

Record ID: 142148

  • Title: BRAZIL-ECONOMY/GDP Brazil economy sinks into worse-than-expected recession
  • Date: 28th August 2015
  • Summary: SAO PAULO, BRAZIL (FILE - 2010) (REUTERS) A BUSY SHOPPING STREET PEOPLE WALKING THROUGH THE STREET WITH SHOPPING BAGS RIO DE JANEIRO, BRAZIL (FILE - 2010) (REUTERS) MONEY BEING COUNTED IN A SHOP PAYMENT BEING PROCESS ON CREDIT CARD MACHINE RIO DE JANEIRO, BRAZIL (FILE - 2013) (REUTERS) MONEY BEING PRINTED CLOSE-UP OF PRINTED MONEY BEING CHECKED
  • Embargoed: 12th September 2015 13:00
  • Keywords:
  • Location: Brazil
  • Country: Brazil
  • Topics: General
  • Reuters ID: LVA7IDUR4C7VPNNUVWVNHK4TE899
  • Aspect Ratio: 16:9
  • Story Text: Brazil's economy shrank 1.9 percent in the second quarter, sinking into a recession that has hammered the popularity of President Dilma Rousseff as she struggles to save the country's investment-grade credit rating amid a vast corruption scandal.
    The quarterly contraction, reported by government statistics agency IBGE on Friday (August 28), was bigger than the median forecast of a 1.7 percent drop in a Reuters poll.
    "The three economic activities together showed contraction on the previous quarter, agriculture and fishing, the service sector and industry, all three showed negative growth in relation to the first quarter of 2015. All together this led to a negative growth of 1.9 percent on the previous semester," said National Coordinator of IBGE Accounts, Rebecca De La Rocque, as the figures were released in Rio de Janeiro.
    Rousseff's efforts to cut spending, raise taxes and rein in inflation have failed to lift business and consumer confidence from record lows and left her governing coalition in tatters.
    Investment fell 8.1 percent, declining for the eighth straight quarter in the longest such streak since the current data series started in 1996. Household consumption fell 2.1 percent, the worst drop since 2001, as unemployment hit a five-year high and consumer prices jumped 9 percent in 12 months.
    "The sectors which suffered the greatest impact are those related to industry, such as commerce influenced by retail and even more so commerce influenced by wholesale. Transport and freight was also negatively affected," De La Rocque said on Friday.
    Rousseff's approval rating has fallen into single digits in recent polls as the economy sputters and the political mood sours, worsened by mounting evidence of a kickback scheme that funneled billions of dollars away from state-run firms.
    Brazil's biggest engineering groups have had executives jailed and contracts frozen in the scandal, which threatens to freeze major public works and investments in the energy sector.
    Political fallout from the scandal has also turned key congressional allies against Rousseff, sabotaging her austerity efforts and emboldening the opposition's calls for impeachment.
    Government spending rose 0.7 percent in the second quarter.
    Credit rating agencies have cut Brazil to near-junk status this year and warned of more downgrades if the government cannot close a budget gap and lay the foundations for economic growth.
    IBGE revised first-quarter growth to a 0.7 percent drop, down from a decline of 0.2 percent reported in May, which should force economists to revisit their annual forecasts.
    Economists already expect Brazil's economy to shrink more than 2 percent this year, the worst drop since 1990, and keep contracting in 2016, according to a weekly central bank poll.
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