Reuters
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Brazil’s economy barely grew in the first quarter as investment plunged, reflecting a broad malaise that has stirred recent labour unrest and street protests as President Dilma Rousseff seeks a second term.
Data released by the government yesterday was for the most part like a broken record of the last three years in Brazil: shrinking factory output, falling investment and flat consumer spending, while a good performance by agriculture and heavy government spending ahead of the October election tilted the overall balance toward modest growth.
Gross domestic product grew 0.2% from January to March compared to the previous quarter, statistics agency IBGE said.
That was a slower rate than 0.4% growth in the fourth quarter, a number that was revised downward.
“I couldn’t find anything positive at all in the (data),” said Bruno Rovai, an economist at Barclays.
He and other economists said falling confidence among investors and consumers, plus rising inventories, likely spelled continued weak activity through 2014 and probably beyond.
After a long commodities-fuelled boom last decade, Brazil’s economy has fallen from grace on Wall Street and averaged just 2% annual growth under Rousseff’s left-leaning policies.
Unemployment remains near record lows while poverty continues to fall, and many Brazilians are still happy with the gains they’ve made over the past decade.
That helps explain why Rousseff retains a healthy lead over her two more centrist main opponents in polls ahead of the October 5 vote.
Still, many voters, especially those in the middle class, are frustrated by bad infrastructure and 6% annual inflation eating away at their wages - and they’ve been increasingly inclined to vent their anger via strikes and street protests.
Possible unrest during the World Cup, which starts on June 12 in Sao Paulo, is a big concern for the government and world soccer body FIFA as the economic tensions mix with Brazilians’ anger over public money being spent to host the tournament.
The World Cup will provide a needed boost to Latin America’s biggest economy as some 600,000 foreign tourists are expected to attend for a month of games and parties.
The government expects the event will goose GDP by 0.5 percentage points, while private economists expect a more modest 0.2 percentage-point increase.
Nevertheless, economists on average have said they expect GDP to grow just 1.6% in 2014 - and some said they would lower their forecasts once they fully analyse yesterday’s data.
Fixed investment fell for a third straight quarter, down 2.1% compared to the fourth quarter.
Investment now accounts for 17.7% of Brazil’s GDP - one of the lowest rates in Latin America, helping explain the lousy ports, roads and public services that have drawn many protesters’ rage.
Household spending shrank 0.1% compared to the previous quarter, its first decline in nearly three years.
Industry shrank 0.8%, while agriculture grew a healthy 3.6%.
Government spending was the other bright spot, expanding 0.7%.
Rousseff’s support among many voters is underpinned by her government’s welfare and housing construction programmes.