World Economy

Brazil Technically Out of Recession

Brazil Technically  Out of RecessionBrazil Technically  Out of Recession

The Brazilian economy technically got out of recession after two quarters, as it grew by 0.6% July-September, the Brazilian Central Bank said.

The assessment is based on calculations of the bank’s so-called Economic Activity Index (IBC-Br), which is used to estimate GDP, Fin24 reported Tuesday.

This is the best IBC-Br result since the second quarter of 2013, when it grew by 1.47%. Overall, the Brazilian economy – the seventh-largest in the world – has grown by 0.01% in the first three quarters of 2014, in relation to the same period of 2013.

The Brazilian Central Bank upheld its overall expectation of 0.7% growth for 2014.

The index, a proxy of gross domestic product data compiled by statistics agency IBGE, rose 0.6 percent in the third quarter from the previous one.

 GDP Data

If confirmed in GDP data due out later this month, the increase would signify the end of Brazil’s current recession after two consecutive quarters with no growth.

The IBC-Br index, a gauge of activity in the farming, industry and services sectors, has diverged from official GDP data many times in recent years. Economists also warn any economic recovery will probably be very slow as re-elected President Dilma Rousseff is expected to roll back part of the economic stimulus implemented over the past few years.

“We continue to expect low growth for the next few quarters,” economists at local consultancy firm MCM Consultores said in a research note.

  Growth Forecast

Private sector analysts raised their 2014 growth forecast for Brazil’s economy to 0.21 percent from 0.20 percent last week, the Central Bank said.

Analysts left their 2015 gross domestic product (GDP) growth estimate unchanged at 0.80 percent, the Central Bank said.

The GDP growth estimate was included in the Boletin Focus, a weekly Central Bank survey of analysts from about 100 private financial institutions on the state of the national economy.

Brazil’s economy, according to official figures, contracted by 0.60 percent in the April-June period, marking the second consecutive quarter of negative GDP growth and meeting the technical definition of a recession.

Brazil’s GDP expanded by 7.5 percent in 2010, but the economy posted tepid growth of 2.7 percent in 2011 and just 1 percent in 2012.

Latin America’s largest economy grew 2.3 percent in 2013.

The government expects the economy to grow 0.90 percent this year, while the Central Bank sees GDP expanding at a 0.60 percent rate.

The analysts surveyed for the Boletin Focus expect the country to end 2014 with an inflation rate of 6.4 percent and for prices to rise 6.4 percent in 2015.

The government has an inflation target of 4.5 percent for this year, with a 2 percent band that allows a top-end rate of 6.5 percent. Brazil ended 2013 with an inflation rate of 5.91 percent.

A surge in prices at the start of this year appeared to threaten the government’s target, but inflation has finally eased in the wake of interest rate hikes by the Central Bank.

Analysts expect the Central Bank’s benchmark rate to end the year at 11.5 percent and to be hiked to 12 percent in 2015.