Brazil's economy signals slow recovery as Temer waits in the wings

miércoles 11 de mayo de 2016 17:15 GYT

By Silvio Cascione

BRASILIA May 11 (Reuters) - Brazil's worst recession in decades may be close to bottoming out as Vice President Michel Temer prepares to assume power with a market-friendly agenda and broad support to end a political crisis that has paralyzed the government for months.

Optimism that Temer will pare back state subsidies and restore confidence in the world's ninth-biggest economy has spurred a rally in Brazilian stocks and prompted economists to start raising growth forecasts for this year and 2017.

Brazil, once one of the darlings of the emerging markets, will see its GDP shrink 3.9 percent this year and grow only 0.50 percent in 2017, according to the median forecasts of about 100 economists polled last week by the central bank.

Although cold comfort for a country experiencing a surge in unemployment, downdraft in consumer spending and inflation of nearly 10 percent, it was the first time that the growth projections had improved in nearly a year.

Orchestrating a turnaround will be a daunting task for Temer. The 75-year-old leader of Brazil's largest party will take over from President Dilma Rousseff if the Senate, as expected, votes on Wednesday to put the leftist leader on trial for breaking budget rules.

Job losses are piling up at a record pace, and some analysts warn that the rallying Brazilian stock market - up about 40 percent in dollar terms in 2016 - reflects investors' wishful thinking after years of interventionism under Rousseff.

Still, a few green shoots sprouted in recent weeks suggesting the economy may be slowly turning a corner.

With economic output down 7 percent since 2014, companies have depleted excess inventories and labor costs have eased. Industrial production, now at 2008 levels, grew in March at the fastest pace in more than two years.   Continuación...