Brasília – by Moises Avila (AFP)
Brazil’s economy exited recession with growth of 0.1 percent in the third quarter, the government said Friday, a tepid result that is nevertheless welcome news for struggling President Dilma Rousseff.
The data came a day after Rousseff, who has battled to reignite growth in the world’s seventh-largest economy, named a new economic team featuring market-friendly bank executive Joaquim Levy as finance minister.
The finance ministry welcomed the news, underlining that the industrial sector had posted growth of 1.7 percent.
“The economy has begun the process of returning to growth, albeit at a still-modest pace,” it said.
The services sector has also started to expand again, said the government statistics institute.
However, compared with the same period last year, GDP was still down 0.2 percent in the third quarter.
Brazil’s economy contracted by 0.2 percent in the first quarter and 0.6 percent in the second, officially entering recession.
The malaise forced Rousseff onto the defensive as she waged a hard-fought re-election battle last month.
Fending off opponents’ attacks of her economic record with promises to take a new policy direction, she narrowly won a new four-year term, which starts in January.
The president is deeply unpopular with the business community and markets, not least owing to heavy government intervention in economic policy.
Her government is also mired in a huge corruption scandal at state-owned oil giant Petrobras, which has already led to the arrests of a clutch of top businessmen amid claims that dozens of politicians, chiefly Rousseff allies, received massive kickbacks on contracts.
Levy’s appointment as finance minister was a clear effort to woo back the confidence of the financial community.
Nicknamed “Scissorhands” for his steely budgetary management, he was previously chief executive officer of Bradesco Asset Management (Bram), part of Brazil’s second-largest private bank.
Rousseff also named former deputy finance minister Nelson Barbosa as planning minister.
Central bank chief Alexandre Tombini kept his post through the shake-up.
Levy, 53, a University of Chicago-trained economist, vowed Thursday to rein in the government’s books, while Tombini vowed to tackle inflation, which is stubbornly hovering above the official target ceiling of 6.5 percent.
– ‘Wait and see’ –
Analysts downplayed the significance of Friday’s growth figure, saying any real change in direction would depend on the new economic team.
“This figure is practically flat. We can’t say it’s recovering, but we also can’t say it’s falling,” said Leandro Martins, a consultant at Walpires Corretora in Sao Paulo.
“We have to wait and see what the new economic team is going to do going forward,” he added.
Alex Agostini, chief economist at Austin Rating, said the data showed the “fragility” of the Brazilian economy.
“This 0.1 percent is weak, and worse still if you consider that there was a contraction of 0.2 percent compared to the same period the year before. It’s a reflection of irresponsible fiscal policy,” he said.
The new economic team “opens positive expectations that they are going to put the fiscal house in order,” he said.
“They have the know-how. But we don’t know if the government will give them the autonomy to do it.”
– Slashed forecasts, downgrade threat –
Rousseff, 66, has struggled to rekindle the economic magic of her predecessor and mentor, Luiz Inacio Lula da Silva, who presided over strong growth during his eight-year administration — peaking at 7.5 percent in 2010, the year Rousseff was elected.
Under Rousseff, Brazil has posted growth of 2.7 percent in 2011, 1.0 percent in 2012 and 2.5 percent last year.
This year, the central bank is forecasting growth of just 0.7 percent, it said in September, slashing its previous forecast of 1.6 percent.
The International Monetary Fund also cut its 2014 growth forecast for Brazil, from 1.3 percent to 0.3 percent.
Amid this bad news, ratings agency Moody’s revised its outlook for Brazil from stable to negative, indicating the country was at risk of losing its investment-grade credit rating.
Markets took little comfort in Friday’s growth figures, with Sao Paulo’s stock market chalking up its second day of losses to close down 0.10 percent.