Brazil Finance Ministry Says 2017 GDP to Be Lower Than Expected -- Update
November 21 2016 - 3:36PM
Dow Jones News
By Marla Dickerson and Luciana Magalhaes
SÃO PAULO -- The Brazilian government on Monday reduced its 2017
annual GDP forecast to 1.0% from 1.6%, a sign that Latin America's
largest economy is struggling to rebound from a brutal
recession.
Fabio Kanczuk, secretary of economic policy for Brazil's Finance
Ministry, made the announcement at a press conference in
Brasília.
Low oil prices and the lingering effects of a massive corruption
scandal have hammered the country's key oil and gas sector, as well
as state-run Petróleo Brasileiro SA Petrobras, as the company is
known, is Brazil's largest company and biggest single source of
investment.
Giant construction firms caught up in the graft probe have
likewise been paralyzed, sending layoffs rippling through the
economy.
Unemployment hit 11.8% in the June to August period. Around 12
million Brazilians are unemployed. Rising joblessness and falling
incomes have hurt retailers, while sales of homes and cars have
plummeted.
That vicious circle is weighing on Brazil's growth, with
companies afraid to invest and consumers wary of spending, said
Carlos Kawall, chief economist at Banco Safra in São Paulo and a
former head of Brazil's Treasury.
"To put their finances in order, companies are selling assets
and cutting investment," he said. "We also see families making an
effort to reduce their debt."
Brazil is grappling with ballooning debt and deficits that
threaten its financial stability. The nation's debt is now rated
junk by major ratings firms. The government of President Michel
Temer is working to pass unpopular austerity measures, including a
constitutional amendment to limit spending increases to the rate of
inflation and reforms to the shaky pension system.
Finance Minister Henrique Meirelles had signaled the GDP
revisions last week on a visit to New York where he was meeting
with investors.
Mr. Meirelles said Brazil must move quickly to implement
austerity measures to get Brazil back on track.
Write to Marla Dickerson at Marla.Dickerson@wsj.com and Luciana
Magalhaes at Luciana.Magalhaes@wsj.com
(END) Dow Jones Newswires
November 21, 2016 15:21 ET (20:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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