RIO DE JANEIRO: Brazil emerged from its worst ever recession in the first quarter of 2017, officials said Thursday, but political turmoil continued to threaten the weak recovery.
Largely thanks to booming agro-industry results, the economy grew one percent for the quarter, ending eight consecutive quarters of shrinkage, the state statistics office said.
That offered a glimmer of light for Latin America’s biggest economy. It could also throw a lifeline to President Michel Temer as he tries to survive a corruption scandal.
Data from the IBGE statistics bureau put the good news in its dismal context: the first quarter’s GDP was down 0.4 percent compared to the same period in 2016.
Overall the economy dropped a whopping 3.8 percent in 2015 and 3.6 percent in 2016, meaning Brazil has a long way to climb back up.
But Temer celebrated: “Brazil has left the recession,” he said. “We are growing.”
Finance Minister Henrique Mereilles called it a “historic day” after Brazil’s “worst recession in a century” that has seen millions lose their jobs.
“There is still some way to go to achieve a full economic recovery, but we are heading in the right direction,” he said in a statement.
“Brazil has finally exited recession,” but “the recovery will be stop-start,” analyst Neil Shearing of research group Capital Economics wrote in a note on Thursday.
He warned of the risk of weaker growth in the second quarter — “and that’s before the full effects of the latest political crisis are felt.”
Economist Mauro Rochlin at Brazil’s Getulio Vargas Foundation told AFP the recession cannot be considered to be over until a second quarter of growth is registered.
He said the economy had sunk so low that businesses had gotten a boost from falling wages. He saw a “trend towards recovery, but with still quite a narrow base.”
The first-quarter bounce was led by a surge from Brazil’s giant agro-industry, up 13.4 percent. This, economists say, skewed the overall GDP figure because it is based largely on record harvests collected at the start of the year.
The industrial sector grew 0.9 percent. Services were flat and while that was an improvement on negative growth, it also signaled a lack of confidence by a public battered by unemployment and continuously falling family consumption.
Economists say the patchy improvements in different sectors, and the risk that the next quarter will reverse the gains, make it too early to declare an end to the recession.
Austerity and scandal
Temer has previously declared an imminent end to the recession, citing forecasts predicting that 2017 will close with about 0.5 percent growth.
He credits his plan to enact austerity reforms for the upturn. The reforms, which Temer says will impose fiscal discipline, are unpopular with ordinary Brazilians but backed by the markets.
Now Temer argues that any move to remove him from office over the corruption scandal would doom the reforms and plunge Brazil into new instability.
There was another modest piece of good news on Wednesday, when unemployment figures showed a slight dip to 13.6 percent rather than yet another record rise. It was the first fall in unemployment figures since 2014.
Even so, 14 million people officially remain without jobs.
Later on Wednesday, the Central Bank lowered its key interest rate further by one full percent.
Temer came into office just over a year ago, when the leftist president Dilma Rousseff was impeached for breaking government accounting rules.
He promised stability and a return to economic health by the end of 2018, when his mandate ends. However, Temer now finds himself facing far more serious allegations than Rousseff ever did.