Brazil’s economy grows for the first time in two years

Brazil’s economy grows for the first time in two years

Brazil will release its economic growth figures for the first three months of the year on Wednesday. Finance Minister Henrique

Photo: Getty

Photo: Getty

Brazil will release its economic growth figures for the first three months of the year on Wednesday.

Finance Minister Henrique Meirelles says the economy grew between 0.7% and 0.8% in the first quarter, although economists think 0.5% is more realistic. But even if Meirelles’ optimism is well-founded, Brazil is still far from shaking off its two-year recession.

While the country’s economic fundamentals are stabilising, the economy faces severe political headwinds. Various corruption scandals—Petrobras, Odebrecht and the meat industry, to name but a few—have rocked the political class in recent years. It was unsurprising then when Mr Temer himself came under investigation earlier this month, allegedly for endorsing the payment of hush money to a jailed politician.

Temer denies wrongdoing and refuses to resign. But the investigation could significantly delay, if not altogether halt, the president’s ambitious and much-needed reforms to a lavish social security system and over-regulated labour market.

While promise of reforms had boosted investor confidence, news of an unravelling Temer investigation threatens to undo this progress; the country’s stock market fell 9% on the day the probe was announced.