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By Silvio Cascione
BRASILIA, March 27 Brazil's economy grew a
slightly better-than-expected 0.1 percent in 2014, but sliding
investment set the stage for what most observers expect will be
a painful recession this year.
Last year's modest expansion, as published by the government
statistics agency on Friday, was still the worst performance for
Latin America's largest economy since 2009 and was largely
shrugged off by investors focused on rising inflation and
unemployment, and President Dilma Rousseff's political troubles.
"We are in for a very weak 2015," said Pedro Tuesta, an
analyst with consulting firm 4Cast in New York.
Brazil's meager 2014 growth hanged on government
consumption, a symptom of the country's deepening imbalances.
While the 1.3 percent increase in public sector demand
avoided a sharper drop in economic activity, it also boosted
public debt, raising eyebrows at ratings agencies that
threatened to strip Brazil's debt of its investment-grade
This year, with Rousseff changing tack and cutting public
spending in order to regain investor confidence, Brazil's
economy is set to shrink 0.8 percent, which would be its deepest
slump in 25 years, according to market estimates.
"2015 will be tough, with few chances of recovery and a
worrisome adjustment of still-unknown scale," said José Lopes
Filho, president of the Brazilian association of distributors of
Economists warn investments are set for another steep drop
in 2015 as state-run oil company Petroleo Brasileiro SA
and several of its contractors grapple with fallout
from a massive corruption scandal.
Finance Minister Joaquim Levy, a University of
Chicago-trained economist, has reiterated that pushing through
austerity measures takes "courage" but will help return Brazil
to growth by 2016.
Investments fell 4.4 percent in 2014, ending the year with
its sixth quarterly drop in a row. Political uncertainty ahead
of the October presidential election and stubbornly high
inflation sent business confidence to record lows.
Household consumption, a reliable growth engine during
Brazil's long boom last decade, grew a disappointing 0.9 percent
in 2014 after having increased 2.9 percent in the previous year.
Lower commodities prices also contributed to Brazil's
weakness as exports dropped 1.1 percent in 2014.
The economy grew 0.3 percent in the fourth quarter compared
with the previous quarter, beating market
expectations for a 0.2 percent contraction.
The 2014 gross domestic product numbers were calculated
under a new methodology in line with international standards,
which complicated forecasting, according to economists.
(Additional reporting by Bruno Federowski; Editing by Brian
Winter and W Simon)