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Roundup: Brazilian government under pressure as economy contracts for 5th quarter

Xinhua, June 2, 2016 Adjust font size:

The Brazilian economy contracted 0.3 percent in the first quarter, registering continued recession in its fifth straight quarter, the government announced on Wednesday.

This consecutive contraction and sluggishness in major sectors are increasingly pressing on interim President Michel Temer's government.

According to data released by the official Brazilian Institute of Geography and Statistics (IBGE), Brazil's GDP in Q1 of 2016 was 5.4 percent lower year-on-year, with industry, agriculture and services sectors shrinking 1.2 percent, 0.3 percent and 0.2 percent, respectively.

On yearly basis, industry tumbled 7.3 percent, followed by agriculture and services, both seeing a shrink of 3.7 percent.

More worryingly, domestic consumption, a pillar propeller of Brazil's growth over the last decades, fell 1.7 percent in Q1 compared with that of Q4 in 2015, and went down 6.3 percent year-on-year.

Nevertheless, unemployment in the south American country has now risen to 11.2 percent, the IBGE report added.

Brazil's interim government attributed the 0.3 percent fall in Q1 mainly to "domestic issues."

"The statistics of our national accounts confirmed that, in the first quarter, essentially due to domestic developments, we continued the most intense recession in our history," the Ministry of Finance said in a press release.

"In the next quarters, however, largely due to the implementation of recently announced initiatives, we will see the Brazilian economy begin to grow again," the ministry added.

However, the Paris-based Organization for Economic Cooperation and Development (OECD) was not so optimistic about the data.

In a note released also on Wednesday, the OECD said that Brazil was undergoing a "profound recession", and worsened its predictions for the country's economic fortune in 2016.

The Latin America's largest economy will contract 4.3 percent in 2016 and 1.7 percent in 2017 due to political uncertainty and continuing corruption investigations, "which undermined the confidence of consumers and businesses," the OECD note said.

Previous predictions by other international economic observers believed that Brazil will shrink 3.83 percent in 2016 and return to a modest 0.55 percent growth in 2017.

International investment bank Goldman Sachs saw the recession in Brazil to continue in the second quarter, adding that investment kept falling in Brazil for the last 10 quarters.

Since taking office on May 12, President Temer has successfully seen Congress raise the country's deficit ceiling, announced plans to liberalize the oil industry and vowed to make swinging cuts to government spending.

In 2015, the national economy contracted 3.8 percent, the worst in 25 years. Many analysts predict a similar contraction for this year. Endi