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To: Richard Grenier who wrote (23143)	11/19/1998 7:56:00 PM
From: goldsnow	Respond to of 116753

Brazil's GDP slumps 1.5% in Q3 Q4 seen to be worse on impact of soaring rates on industry RAZIL'S economy tumbled in the third quarter, its worst quarterly decline in three years, as high interest rates crimped consumer demand, further evidence a recession looms for Latin America's biggest economy. Brazil's gross domestic product fell a worse-than-expected 1.5 per cent in the third quarter compared with the previous quarter. The seasonally-adjusted GDP fell 0.14 per cent over the year-ago period, the government statistics agency said. Agriculture and industry led the economy down. The worse-than-expected GDP decline is evidence of the impact of soaring interest rates on industries such as cars and household appliances, and may forebode an even worse fourth quarter and 1999. Economists had expected growth of about 0.7 per cent on the quarter. "The third quarter was worse than we had expected, especially for the industrial sector," said Odair Abate at Lloyds Bank in Sao Paulo. "It's a clear sign the economy is slowing down and the worse is yet to come." Mr Abate sees the economy growing 0.5 per cent in 1998. Growth for the first three quarters this year was 0.79 per cent, compared with the year-ago period. The decline was down from growth of 1.4 per cent in the second quarter. Economists expect the economy to slump further this quarter and into 1999. Banks such as J P Morgan say the world's ninth largest economy will shrink by about 3 per cent in 1999, as high interest rates, now at 39 per cent, stifle growth. "The determining factor explaining the GDP variation... was the performance of industry. The expectation that manufacturing industry and civil construction would grow in the third quarter didn't materialise," said the agency, known as IBGE. In September, Brazilian market rates doubled to 40 per cent after the central bank raised its minimum lending rate to stop an outflow of US dollars from the country. Investors were concerned that the government would devalue its currency because of yawning current account and budget deficits. The capital flight and the closing of capital markets for emerging market lenders such as Brazil forced the country to turn to the IMF for aid of up to US$41.5 billion (S$67.6 billion). -- Bloomberg business-times.asia1.com.sg