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  • In Bolsonaro’s administration, the Brazilian economy has shrunk for the first time since 2016.

    In Bolsonaro’s administration, the Brazilian economy has shrunk for the first time since 2016. | Photo: Reuters

Published 3 June 2019

Brazil’s economy is on brink of a double-dip recession, meaning a second fall caused as gross domestic product (GDP) growth slides back to negative after a period of positive growth.

As Brazil approaches economic double-dip recession, the country’s president Jair Bolsonaro declared on Monday "to not understand the economy" when asked about a contraction in the economy, a first since 2016.

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Brazil’s Economy Shrank, First Time Since 2016

“I already said that I did not understand economics...I trust the economy 100 percent in [Minister of Economy] Paulo Guedes," Bolsonaro declared.

And the statement seems to hold its truth as Brazil’s economy is on brink of a double-dip recession, meaning a second fall caused as gross domestic product (GDP) growth slides back to negative after a period of positive growth.

According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil’s GDP in the first quarter of this year shrank about 0.2 percent from the preceding three months, for the first time since 2016 when the Latin American nation was coming out of an economic recession (2014 to 2016) after worldwide prices of oil and commodities fell. 

The economy was expected to grow this quarter by 0.5 percent to at least mimic 2018 results, yet indicators show a very woeful situation and management for the region’s largest economy. 

Fixed investment fell 1.7 percent in the first quarter, industrial and agricultural output fell 0.7 percent and 0.5 percent, respectively, IBGE figures showed. "The economy is stagnating, but the bias is downward. Growth will be near zero this year," said chief economist at Banco Fator in Sao Paulo Jose Francisco Goncalves. 

Bolsonaro’s administration argues that a reform in the pension system will “unlock” the country’s economic potential, yet as Chile has shown, a privatization model only ends up benefiting the companies and harming the workers. A study published by the International Labor Organization (ILO) last year showed that pension reforms similar to those proposed by Bolsonaro failed in 60 percent of the countries that adopted them. 

While economists from Bank of America Merrill Lynch argue that “the key reason for a weaker economic recovery is the significant delay in the pension reform approval and higher risk for a larger dilution (of the proposals).”

In the meantime, almost 55 million Brazilians were living in poverty in 2017, an increase of two million in 2016, according to data released in December 2018 by the official statistics institute of Brazil. The number is equivalent to 26.5 percent of Brazil’s total population and marks a 4 percent rise in one year. 

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