Economy Stops Shrinking but Growth Likely to Remain Stagnant into 2015

11/17/2014 - 12h24

The Brazilian economy has stopped shrinking, but it will remain stagnant for the rest of this year and into 2015, according to data from the Central Bank.

Statistics published on Monday (17) show that the economy grew 0.6% in the third quarter, compared to the three previous months.

This is the best rate of growth since the second quarter last year, but it still does not compensate the fall of 0.8% measured between March and June this year.

From January to September, variation in economic activity was exactly 0.01%, in comparison with the same period last year.

Known as the IBC-Br, the BC's economic activity index is based on indicators for industry, services and trade.

The most complete measure of production and revenue is Gross Domestic Product, figures for which will be announced by the Brazilian Institute of Geography and Statistics (IBGE) at the end of the month.

In the weekly survey conducted by the Central Bank with analysts from banks and consulting firms, the main projection for GDP growth this year remains stable, at 0.21%. For 2015, the estimate is 0.8%.

The last monthly results of IBC-Br show some improvement. There was growth of 0.4% in September, the third consecutive high.

The quarterly numbers show that the growth for the joint production of industry, services and agriculture has been close to or less than zero since the second half of last year.

In this period, activity suffered from the Central Bank's high interest rates, which went from 7.25% per year to the current 11.25%.

The aim was to control credit, consumption and inflation, which, nonetheless, is likely to close the year close to the government's limit of 6.5%. The market's prediction is 6.4% for both this year and next.

This decline has been ongoing since the start of the Rousseff administration.

The international crisis provoked a fall in the price of Brazilian exports, and government policy failed to stimulate the economy with an increase in public spending and intervention in the market.

Translated by TOM GATEHOUSE

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