The Brazilian economy barely grew in the second quarter as a countrywide truckers' strike all but paralyzed key business sectors, a Reuters poll showed, sounding an ominous tone as pivotal presidential elections kick off. Gross domestic product in Latin America's biggest economy likely expanded just 0.1 percent compared with the first three months of the year, according to the median of 28 forecasts.
That would mark the slowest growth rate since Brazil emerged at the start of 2017 from the deepest recession in decades. It is also the latest evidence that the global expansion is becoming more and more uneven, even among developing economies.
Five economists predicted an outright contraction, with the most pessimistic forecasting a 0.6 percent decline. Only one, Societe Generale, expected growth to accelerate from the first quarter's 0.4 percent rate, to 0.6 percent.
Compared with a year earlier, Brazil's GDP likely expanded just 1.1 percent in the second quarter, the weakest since the second quarter of 2017. The Reuters poll results are the latest in a series of downward revisions to 2018 growth forecasts across private- and public-sector forecasters since the strike, which lasted from May 21 to early June, ended.
A recent central bank survey put full-year growth at 1.49 percent, down sharply from 2.50 percent before the protests. Truckers protesting high diesel prices blocked major roadways in late May, disrupting supply chains and knocking everything from retail sales and industrial output to services activity and consumer confidence.
The strike shaved 0.48 percentage point off GDP growth, based on the median of 12 estimates provided as response to an extra question in the poll. Forecasts ranged between 0.2 and 1.2 percentage points, suggesting the exact impact of the protests is still highly uncertain. While several reports have suggested a bounce-back in the following months, economists appear skeptical that growth will pick up steam anytime soon.
Ten of 13 forecasters predicted capital spending contracted in the second quarter, breaking a string of four straight quarters of growth underpinned by record-low interest rates. That would suggest a long-lasting drag on growth as opposed to a temporary bump, which is only set to worsen as an unpredictable presidential campaign undercuts any prospect of long-term planning.
"The strike dealt a major blow to an already weak economy which is unlikely to heal up anytime soon, especially as electoral uncertainty drives firms to postpone investment plans and dries up lending," said Infinity Asset economist Jason Vieira. An underwhelming economic recovery means the jobless rate is unlikely to decline much from 12.4 percent in the short term. Brazil's central bank will probably refrain from raising interest rates even as jitters ahead of the October 7 presidential election, as well as broad selling of emerging market currencies, have pushed the real to a 2-1/2-year low.
Jailed former President Luiz In?cio Lula da Silva has led voter intention polls for months even as it remains likely that he will not be allowed to run. Whether his support will pass along to his replacement, former S?o Paulo Mayor Fernando Haddad, remains an open question. Lula and Haddad have both criticized proposals seen by economists as critical to lifting business sentiment in Brazil, such as an overhaul of the nation's costly pension system.
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