WRAPUP 2-Brazil economic activity tanks, unemployment surges as recession looms

jueves 21 de mayo de 2015 14:04 GYT

(Adds information about further tax increases, graphic)

By Silvio Cascione and Alonso Soto

SAO PAULO/BRASILIA May 21 (Reuters) - Economic activity in Brazil tumbled in the first quarter and unemployment climbed to a near four-year high, adding to signals that a looming recession could worsen as President Dilma Rousseff reins in public spending.

The central bank said on Thursday its IBC-Br economic activity index dropped 0.8 percent in the first quarter from the last three months of 2014, after sliding more than expected in March.

The index, a gauge of activity in the farming, industry and services sectors, serves as a proxy for official gross domestic product. Economists expect Brazil's GDP to shrink 1.2 percent in 2015, the steepest decline in 25 years, according to a central bank poll on Monday.

In a separate report, statistics agency IBGE said Brazil's unemployment rate climbed to 6.4 percent last month, the highest since May 2011.

The figures highlight the steep downturn of the Brazilian economy that has dragged Rousseff's popularity to record lows, reduced fiscal revenues and threatened the investment-grade rating of the once high-flying emerging market star.

The end of a decade-long commodities boom partly explains the fall from grace of the mining and agriculture powerhouse that grew an average of 4 percent a year in the last 10 years.

Other Latin American countries are also starting to feel the pinch of the plunge in commodities prices, with Mexico's economy growing at its slowest pace in over a year in the first quarter.   Continuación...