Brazil economy shrinks 1.7% in Q3 as recession deepens

By Ben Tavener

SAO PAULO

Brazil's economy shrank 1.7 percent in the third quarter, according to official data released Tuesday.

The new figures announced by the Brazilian Institute of Geography and Statistics (IBGE) indicate a deepening the country's economic recession and are the worst third quarter results since 1996 when records began. It also represents a contraction of 4.5 percent for the same period in 2014.

Data showed all three major sectors of the economy in negative territory with agriculture and livestock at 2.4 percent, industry at 1.3 percent and services coming in at 1.0 percent.

The economy also contracted by 0.8 percent in the first quarter, and 2.1 percent in the second, according to revised data.

"We can see that in every single comparisons we had negative results," said IBGE's Claudia Dionísio, adding that has been the case for every quarter so far in 2015.

The government is struggling to bring Latin America's biggest economy back into the black, after it achieved almost 8 percent growth just five years ago.

A series of political crises including a vast corruption scandal at oil giant Petrobras and, the ongoing threat of impeachment against President Dilma Rousseff, has meant the government has so far failed to get the fiscal adjustments through Congress that it believes will improve the economy and return investor confidence.

Congress is now virtually in shutdown after Sen. Delcídio do Amaral, the government's leader in the Upper House and, investment bank BTG Pactual CEO André Esteves, were arrested last week accused of attempting to obstruct the Petrobras investigation.

Rising unemployment, creeping inflation and high interest rates have also hit domestic demand and choked tax revenues.

The most recent polling of Brazilian economists conducted by the central bank predicted GDP would shrink by 3.19 percent this year, which would be the worst performance by the Brazilian economy since 1990 during hyperinflation.

Economists also project contraction by more than 2 percent in 2016, and that inflation would be running at 10.38 percent by year's end, and 6.64 percent next year. The government's central inflation target is 4.5 percent.