Brazil tumbles into recession, GDP falls 1.9% in 2nd quarter
Brazil has slipped into recession, the government said Friday, deepening the gloom in the world’s seventh largest economy already battered by falling commodity prices, political crisis and a corruption scandal.
In the second quarter of this year, gross domestic product fell 1.9 percent, according to official figures.
GDP had already been down 0.7 percent in the first quarter, the government statistics agency IBGE said, revising that figure down further from the earlier estimate of minus 0.2 percent.
Year-on-year, the second quarter growth was down 2.6 percent.
Brazil is now in its biggest contraction for six years and with the 2015 slump forecast to extend in milder form through 2016, economists believe the country is headed for the longest recession since 1931.
Brazil’s economy has been tailing off for four years, ever since the end of a boom fueled by commodity exports, principally to China. Falling prices for oil and other commodities have punched huge holes in the budget.
Adding to the economic malaise is a growing political crisis in which President Dilma Rousseff faces calls for her impeachment and discontent — even among many of her own supporters — over attempts to push through austerity measures.
Rousseff dismissed talk of a growing financial crisis.
“Brazil is a strong country that will grow, will overcome the difficulties, which are momentary,” said the president during a speech to inaugurate a public housing complex in the northeast.
She added: “We have conquered many things. We will not allow the country to go backwards.”
A huge corruption investigation named Operation Car Wash has revealed a bribes-and-embezzlement scheme revolving around state oil giant Petrobras and involving politicians and senior executives.
Rousseff’s Workers’ Party has also been dragged into the scandal, fueling political instability.
“The GDP points to what Brazil has been experiencing recently: a strong recession, a pretty turbulent political situation, with inflation rising, with rates rising,” said Alex Agostini, chief economist at Austin Rating.
“This has impacted on the confidence of investors, or businesses and consumers.”