The Recession in Brazil Is Now Official

Peter Kilander peterk at
Sat Feb 20 10:01:38 PST 1999

Brasilia, Feb 19 (Bloomsberg News)

Brazil fell into recession for the first time in six years as surging interest rates throttled investment and consumer demand.

The country's gross domestic product shrank 1.9 percent in the fourth quarter from the period a year earlier and 1.6 percent from the third quarter. It was the second consecutive quarterly drop -- the standard definition of a recession -- pushing the economy into its first official downturn since 1992.

Worse is yet to come for the $471 billion economy, as inflation picks up and consumer spending and investment collapse in the wake of last month's 37 percent currency devaluation.

"It's going to be a deep recession," said Chip Brown, a senior Latin American economist with Morgan Stanley Dean Witter & Company in New York.

Mr. Brown sees the economy shrinking 7.5 percent in the first quarter. A survey by Bloomberg of 10 economists sees the economy's contraction for the year at 4.1 percent, which would be its worst declince since 1990.

The second-half collapse cut economic growth for the year to 0.2 percent, down from 3.7 percent in 1997.

Brazil's economic slump stems from a run on the currency that drove up interest rates to almost 50 percent last year. The Government eventually succumbed, devaluing the real last month. ---------------------------- "Another perfect catastrophe is dying to go down. It's only looking for the perfect place and time." -- Charles Ponzi

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