Brazil′s economy in recession | Business| Economy and finance news from a German perspective | DW | 28.08.2015
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Brazil's economy in recession

Brazil's economy has entered recession, with the country's GDP contracting in the first two quarters of this year. The news puts further pressure on President Dilma Rousseff, who is facing a growing political crisis.

Brazil's economic output shrank 1.9 percent in the second quarter of this year, official data showed Friday. It follows a 0.7-percent contraction in the first quarter, the government statistics agency IBGE said.

Brazil - the world's seventh-largest economy - has been hit hard by falling commodity prices, as the country relies on revenues generated by raw material exports for funding its state spending.

The economy has been slipping for four years after the end of a boom fueled by commodity exports, mainly to China.

Stringent austerity measures introduced by the government to slash high debt levels, coupled with tax rises and higher interest rates, have also contributed to the economic downturn - by cutting aggregate demand in the economy.

Political concerns

Adding to the economic malaise is a growing political crisis in which President Rousseff faces calls for her impeachment and public discontent over austerity measures implemented by her government.

A corruption scandal at the state oil giant Petrobras, involving politicians and senior executives, has also dented her administration's popularity.

Ratings agency Moody's has cut Brazil's credit rating to near-junk status, reflecting increasing worries about the state of the country's economy.

sri/hg (AFP, Reuters)

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