UPDATE 3-Brazil recession deepens, worst annual drop on record

martes 1 de diciembre de 2015 15:47 GYT

(Adds comment from lawmaker and economist, details of monetary policy and currency drop)

By Silvio Cascione and Brad Haynes

BRASILIA/SAO PAULO Dec 1 (Reuters) - Brazil's economy shrank 1.7 percent in the third quarter, deepening its sharpest recession in 25 years and stoking opposition to President Dilma Rousseff as she struggles to close a growing fiscal deficit and contain a vast corruption scandal.

The quarterly contraction, reported by government statistics agency IBGE on Tuesday, was bigger than the median forecast of 1.2 percent in a Reuters poll of 33 analysts.

Brazil's commodity-fueled boom has crashed spectacularly since Rousseff took office in 2011, forcing her to abandon stimulus efforts this year as she seeks to rescue the federal budget.

The president's unpopular austerity package has foundered in Congress, however, and the recession is shrinking tax revenue faster than she can trim spending, eroding her credibility and leading Standard & Poor's to cut Brazil's credit rating to junk.

"There is still no light at the end of the tunnel," said Luciano Rostagno, chief strategist at Banco Mizuho in Sao Paulo. "In the best case scenario, there will be some turnaround in the second quarter of 2016. ... But the risk is that we'll keep this recessionary outlook for longer."

On an annual basis, Brazil's $1.5 trillion economy dropped 4.5 percent in the third quarter, the steepest decline since the current data series began in 1996.

Investment fell 15.0 percent from a year earlier, declining for the ninth consecutive quarter, as political disarray and a sweeping graft investigation battered business confidence.   Continuación...