Brazil has also taken a hit from the sweeping “Car Wash” investigation into corruption at Petrobras, the state-owned oil company, which has paralysed congress and the corporate sector.
The scandal has also begun to spread to the financial services industry, with the arrest last week of billionaire banker André Esteves, chief executive of investment bank BTG Pactual.
Brazil’s statistics agency, the IBGE, said on Tuesday that GDP in the three months to September fell 1.7 per cent against a revised second quarter, worse than analysts’ expectations. The year-on-year fall was “the biggest since the start of the historical data series in 1996”, the IBGE said.
The slowdown is generating a perfect storm of negative economic data. Unemployment rose to 7.9 per cent in September, up from 4.7 per cent in October last year, inflation is running at more than 10 per cent for the first time since 2002 and Brazil’s government budget deficit is now at 9.5 per cent of gross domestic product.
The poor GDP figures pile more pressure on Brazil’s left-leaning president, Dilma Rousseff, who is trying to implement fiscal austerity measures while battling low approval ratings and calls for her impeachment in Congress.
“It seems likely that GDP will fall by something like 3.5 per cent this year [rather than the 2.5 per cent we had expected],” Capital Economics, a London-based research house, said in a note.
While Brazil’s problems are largely of its own making, it is not the only big emerging economy to suffer from the end of the commodities supercycle and slowing growth in China.
Russia is experiencing its first recession since 2009 amid low oil prices and western sanctions imposed over the Kremlin’s role in the Ukraine crisis — although officials say the economy will return to growth next year.
Worryingly for Brazil’s policymakers, the declines were across the board, with agriculture contracting 2.4 per cent compared with the previous three months while industry fell 1.3 per cent and services dropped 1 per cent.
Household consumption fell 1.5 per cent and gross fixed capital formation, or investment, was down 4 per cent during the three months.
The IBGE said the fall in agriculture was due to weak harvests for several commodities that normally perform strongly during the three months to the end of September, including coffee, sugar cane, oranges, cotton and wheat. Forestry and cattle husbandry also performed weakly.
“The economy has not found a bottom yet,” said Banco Mizuho do Brasil chief strategist Luciano Rostagno, who is also predicting a 3.5 per cent drop this year.
The scandal has also begun to spread to the financial services industry, with the arrest last week of billionaire banker André Esteves, chief executive of investment bank BTG Pactual.
Brazil’s statistics agency, the IBGE, said on Tuesday that GDP in the three months to September fell 1.7 per cent against a revised second quarter, worse than analysts’ expectations. The year-on-year fall was “the biggest since the start of the historical data series in 1996”, the IBGE said.
The slowdown is generating a perfect storm of negative economic data. Unemployment rose to 7.9 per cent in September, up from 4.7 per cent in October last year, inflation is running at more than 10 per cent for the first time since 2002 and Brazil’s government budget deficit is now at 9.5 per cent of gross domestic product.
The poor GDP figures pile more pressure on Brazil’s left-leaning president, Dilma Rousseff, who is trying to implement fiscal austerity measures while battling low approval ratings and calls for her impeachment in Congress.
“It seems likely that GDP will fall by something like 3.5 per cent this year [rather than the 2.5 per cent we had expected],” Capital Economics, a London-based research house, said in a note.
While Brazil’s problems are largely of its own making, it is not the only big emerging economy to suffer from the end of the commodities supercycle and slowing growth in China.
Russia is experiencing its first recession since 2009 amid low oil prices and western sanctions imposed over the Kremlin’s role in the Ukraine crisis — although officials say the economy will return to growth next year.
Worryingly for Brazil’s policymakers, the declines were across the board, with agriculture contracting 2.4 per cent compared with the previous three months while industry fell 1.3 per cent and services dropped 1 per cent.
Household consumption fell 1.5 per cent and gross fixed capital formation, or investment, was down 4 per cent during the three months.
The IBGE said the fall in agriculture was due to weak harvests for several commodities that normally perform strongly during the three months to the end of September, including coffee, sugar cane, oranges, cotton and wheat. Forestry and cattle husbandry also performed weakly.
“The economy has not found a bottom yet,” said Banco Mizuho do Brasil chief strategist Luciano Rostagno, who is also predicting a 3.5 per cent drop this year.
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