RIO DE JANEIRO: Brazil’s gross domestic product has slipped 1.9 percent in second quarter as the world’s seventh largest economy’s has fallen back into recession after political crisis and a corruption scandal.
According to official figures , Gross domestic product (GDP) had already been down 0.7 percent in the first quarter, the government statistics agency IBGE said.
Brazil’s economy has been in trouble 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 austerity measures.
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.
“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.”
A quick recovery is not expected, with unemployment rising steadily and the national currency, the real, down about 25 percent this year against the US dollar.
Earlier this month, a central bank survey of economists for the first time indicated that the contraction will continue through 2016 at a shallower rate.
That survey also showed that inflation remains forecast at 9.32 percent this year, but it raised the 2016 projection for price rises to 5.44 percent from 5.43 percent. Moody’s has cut Brazil’s credit rating to near junk status, reflecting growing struggles with debt.
The figures showed the steepest second quarter shrinkage in the industrial sector, which includes the troubled oil industry centered on Petrobras, at 4.3 percent. Agriculture, where Brazil is one of the world’s main producers of commodities like soybeans, sugar and poultry, slipped 2.7 percent. Reflecting the country’s slowdown, consumer spending fell 2.1 percent, the second consecutive quarterly drop.
