According to Bloomberg, GDP contracted 0.04% from theprevious three months, ascredit curbs, higher borrowing costs and budget cuts checkeddemand. The contraction, the first since the first quarter of2009, is equivalent to an annualized decline of 0.17%.
“The stimulus will prevent the economy from deceleratingtoo drastically, but it won’t drive fast economic growth likeMantega wants,” said Enestor Dos Santos, senior Brazileconomist for BBVA, who forecasts 3.6 percent for2012 (Credit Suisse is not as optimistic). As the global environment deteriorates, “five percentgrowth isn’t feasible.”
“Brazil looks like it’s destined to enter a technicalrecession,” Neil Shearing from Capital Economics said in a phone interview. “This presentsan opportunity to policy makers to get rates into single-digitterritory and keep them there.”
The third-quarter contraction “has little to do with theinternational crisis and more with the delayed impact ofmonetary tightening and credit curbs,” Flavio Serrano, senioreconomist at Espirito Santo Investment Bank in Sao Paulo, saidin a phone interview.
Industrial output was the part of the economy hit thehardest by the deepening debt crisis in Europe, posting inSeptember the second-biggest decline since the collapse ofLehman Brothers Holdings Inc. in 2008. Production sank 1.9percent in September and 0.6 percent in October, according tothe national statistics agency, as manufacturers were alreadyreeling from a 46 percent rally in the real against the dollarfrom the end of 2008 through August, the most among majoremerging markets.