Economy in recession on back of lower confidence
Brazil’s economy slipped into recession for the first time in more than five years as investments contracted on lower confidence before the October presidential election.
GDP shrank by 0.6% in the period from April to June from the previous three months after contracting a revised 0.2% in the first quarter, according to the national statistics agency. The contraction in the second quarter was larger than expected.
President Dilma Rousseff has attempted to revive growth with tax cuts, billions of dollars in credit and higher social spending. With inflation hovering around the upper limit of the target range, consumer and business confidence eroded in the run-up to the firstround vote on October 5. It’s the first time the economy contracted for two consecutive quarters since the aftermath of the global financial crisis in 2008.
“This is the last thing Dilma would have wanted, today’s data is the worst-case outcome for her,” said Neil Shearing, chief emerging markets economist at Capital Economics. “This is clearly going to put pressure on the central bank to loosen policy to support growth.”