Brazil Seen Reporting Recession Bottomed Out in 1st Qtr, Shrinking 0.8%
Brasilia, May 13 (Bloomberg) -- Brazil's recession bottomed
out in the first quarter as the return of foreign credit lines
and a string of interest rate cuts revive Latin America's biggest
economy.
The gross domestic product shrank 0.8 percent from the
fourth quarter after shrinking 1.6 percent the last three months
of 1998, according to a Bloomberg survey of three economists. The
government is due to release the data at 11 a.m. (10 a.m. New
York time).
The year-on-year decline for the quarter could be 2.9
percent, according to an average of four forecasts. They ranged
from a 1.9 percent to 5 percent contraction.
While the shrinking $540 billion economy has driven
unemployment to near a record high, Brazil's recovery from
January's currency devaluation means growth could return by the
second half.
''The first quarter and the whole year won't be as bad as
initially expected,'' said Adrienne Pratt, a Latin American
economist with the Economist Intelligence Unit in London.
''They're doing incredibly well.''
The first quarter was buoyed by surging car production,
stoked by the suspension of some auto taxes. Looking ahead,
growth could be driven by central bank interest rate cuts.
Yesterday, Brazil cut rates for a sixth time in seven weeks,
and central Bank officials suggested more cuts could come soon as
inflation slows.
The bank cut its target overnight interest rate to 27
percent, its lowest level since September, from 29.5 percent.
That's the second cut in six days. The rate had been as high as
45 percent after January's currency devaluation.
This is a rate ''that won't be around for long,'' said Luis
Fernando Figueiredo, monetary policy director at the bank.
The following is a breakdown of the quarter-on-quarter
forecasts by firm.
Firm Forecast
Bankers Trust -1.2
J.P. Morgan 0.4
MCM Consultories -1.6
The following are the year-on-year forecasts.
Firm Forecast
BCP Securities -5.0%
J.P. Morgan -1.5%
Bankers Trust -3.1%
MCM -1.9%
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