Brazil tum­bles into re­ces­sion, GDP falls 1.9% in 2nd quar­ter

The China Post - - INTERNATIONAL - BY LAURA BONILLA CAL

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.”

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