Brazil's GDP Falls 0.2% in First Quarter and Discussion about Interest Rate Cuts Returns

With stagnated economy and mining sector damaged by Brumadinho, country flirts with a new recession

Brazil’s gross domestic product (GDP) contracted 0.2% this quarter compared to last quarter, intensifying pressure on the government to adopt measures that stimulate the economy, including cutting interest rates. 

The restriction in the iron mining in Minas Gerais after the Brumadinho tragedy upset the extractive industry (-6.3%) pushed the GDP into negative terrain. The last time this sector suffered as much in a crisis was 2008.

In this file picture, Brazilian President Jair Bolsonaro (L) listens to his Economy Minister Paulo Guedes during a ceremony at Planalto Palace in Brasilia. (Photo by EVARISTO SA / AFP) - AFP

The industry in total registered a 0.7% decrease, while investment fell 1.7%. According to Brazil’s census, family consumption has increased in eight of the last quarters. This quarter it increased by 0.3%.

According to analysts, economic activity has not recuperated since the end of the recession in 2017, and this demands other forces that will stimulate the economy in addition to social security reform—the mantra of Jair Bolsonaro’s administration.

The prospect of this scenario changed made the São Paulo Stock Exchange reach a high, returning to 97 thousand points this month.

Translated by Kiratiana Freelon

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