14:06 GMT +322 November 2017
Live
    Demonstrators take part in a protest against Brazilian President Michel Temer and the latest corruption scandal to hit the country, in Brasilia, Brazil, May 24, 2017

    Brazilian Economic Rebound Continues as GDP Growth Exceeds Expectations

    © REUTERS/ Paulo Whitaker
    Latin America
    Get short URL
    382432

    Brazil may be embroiled in a corruption scandal that has implicated the Brazilian federal government at the highest levels, but the political strife hasn’t carried over to the Brazilian economy. Brazil’s GDP outpaced expected growth in Q2 2017 as part of their recovery from the nation’s most significant economic downturn in a century.

    The Brazilian Institute of Geography and Statistics (IGBE) reported that falling inflation and interest rates were doing wonders for Brazil's economic recovery. GDP grew 0.2 percent over the quarter, instead of the 0.1 percent that had been projected.

    For the first time since 2014, household spending increased. This was due to a government measure allowing employees to draw money from their unemployment funds if they so chose, injecting $14 billion back into the economy between March and July.

    Economists say that so long as consumer spending keeps climbing, Brazil's economy will keep rebounding. "There's been consistent improvement in factors driving consumption: Lower inflation and interest rates are boosting available household income," said Rodolfo Margato, an economist with Spanish banking group the Santander Group, to the Daily Mail.

    "The pace of investments in 2018 will determine whether GDP will grow 1.5 percent or 3 percent," he added.

    Brazil is recovering from an economic crisis that saw their GDP drop 3.8 percent in 2015, and 3.6 percent on top of that in 2016.Some  2.8 million jobs were lost and unemployment hit 12 percent by the end of 2016.

    Brazil is by far the largest economy in South America — its economy makes up 48 percent of the continent's GDP even after two years of drastic recession.

    The economic rebound may prove a blessing to beleaguered Brazilian President Michel Temer, perhaps the single most unpopular leader in the world today. An Ibope poll from July 2017 placed Temer's approval ratings at an impressively low 5 percent.

    Temer has enacted a policy of austerity: cutting interest rates to attract foreign investment and reducing Brazil's staggering fiscal deficit. This has proven enormously unpopular in a nation with extremely high unemployment. That, along with numerous charges of corruption and narrowly avoiding jail time, has brought Temer's approval ratings to historic lows.

    Even with austerity, however, foreign investment continues to shrink in Brazil. The freefalls of 2015 and 2016 are over, replaced with a trickling decline of 0.7 percent over Q2. Foreign investment now makes up 15.5 percent of Brazil's GDP — the lowest rate since Brasilia began tracking it in 1996.

    "It really is amazing how much investment has shrunk," said Goldman Sachs economist Alberto Ramos. The slowdown "hampers productivity and will conspire against growth going forward."

    Related:

    'Price is Too High': Will Brazil and Argentina Help US Intervene in Venezuela?
    At Least 11 People Die as Boat Carrying 70 Sinks in Brazil; Dozens Missing
    WATCH Russia, China, Brazil Compete at Rostec Fireworks Festival in Moscow
    Mercosur Suspends Venezuela's Membership After Brazil's Request
    Brazil to Propose Suspending Venezuela From Mercosur
    Tags:
    recession, economic rebound, GDP growth, Brazilian Institute of Geography and Statistics (IBGE), Michel Temer, Brazil
    Community standardsDiscussion
    Comment via FacebookComment via Sputnik
    • Сomment