UPDATE 3-Brazil scrapes out of recession on government spending

viernes 28 de noviembre de 2014 10:15 GYT

(Adds comments by Finance Ministry)

By Silvio Cascione

BRASILIA Nov 28 (Reuters) - Brazil's economy crawled out of a recession in the third quarter as public spending rose before presidential elections, suggesting growth could be short-lived as the government plans to tighten its budget.

The economy grew 0.1 percent in the third quarter from the previous period, resuming expansion after two consecutive quarters of contraction, government statistics agency IBGE said on Friday. The result missed the median forecast of 0.3 percent growth in a Reuters poll of 36 analysts.

Third-quarter expansion was mostly driven by a steep 1.3 percent increase in government spending. That stimulus is set to end as newly re-elected President Dilma Rousseff seeks to restore market confidence and avoid a credit-rating downgrade.

"Brazil is limping rather than leaping out of recession," said Neil Shearing, chief emerging markets economist at London-based firm Capital Economics.

Brazil's economy has disappointed since 2011. Global demand for the country's commodities has cooled, inflation has remained stubbornly high and investor sentiment soured due to repeated, often erratic, government intervention in the private sector.

The Finance Ministry said Brazil has "all the conditions" to grow faster in the fourth quarter and in 2015 as investments grew for the first time in more than a year.

Economists have been more pessimistic about prospects for Brazil. In addition to the budget cuts and tax hikes under consideration by Rousseff's newly announced economic team, markets expect big infrastructure projects could be scaled back due to a police investigation at state-run oil company Petroleo Brasileiro SA .   Continuación...