BRASILIA, Brazil (AP) \u2014 Brazil\u2019s economy contracted last quarter for the first time in over a year, government data showed Thursday, in a downturn expected to complicate President Luiz In\u00e1cio Lula da Silva\u2019s first year in office.<\/p>\n\n\n\n
Latin America\u2019s largest economy shrank 0.22% in the final three months of last year, weighed down by declines in industry, according to data from the country\u2019s statistics institute.<\/p>\n\n\n\n
Oil production was the only bright spot of the industrial sector in the fourth quarter, with manufacturing, construction and utilities all contracting, the institute said.<\/p>\n\n\n\n
\u201cIt\u2019s a scenario of economic reversal at the end of last year that tends to continue this year,\u201d said S\u00e9rgio Vale, chief economist at MB Associados, who also said high interest rates were impacting the economy.<\/p>\n\n\n\n
Brazil\u2019s Finance Minister Fernando Haddad noted that the central bank last year \u201ctook a very drastic decision\u201d to boost interest rates and damp inflation amid Bolsonaro\u2019s election-year spending.<\/p>\n\n\n\n
\u201cBut the fact is that the economy is decelerating. So we have to harmonize fiscal policy and monetary policy so Brazil doesn\u2019t decelerate any more,\u201d he told reporters.<\/p>\n\n\n\n
Brazil\u2019s President Lula campaigned on eradicating poverty last year and has spent considerable time bemoaning the fact that the central bank has held its benchmark rate at its highest level since 2016 \u2014 13.75% \u2014 most recently at its monetary policy meeting last month. There have been calls from members of his party to force the removal of the central bank\u2019s president, despite the fact the monetary authority has formal independence.<\/p>\n\n\n\n
\u201cA recession is Lula\u2019s big nightmare,\u201d said Thomas Traumann, an independent political analyst, adding that the president has begun \u201cpushing all the buttons he can reach to try to mitigate the effects of an economic retraction among the poor, his main electoral base.\u201d<\/p>\n\n\n\n
Such moves include boosting the minimum wage above inflation, exempting taxes for low-income workers as well as plans to create a program to renegotiate poor peoples\u2019 debts, Traumann said.<\/p>\n\n\n\n
On Thursday, he presented the relaunch of his social welfare program, Bolsa Familia.<\/p>\n\n\n\n
It will serve 21 million impoverished families who will receive a base monthly payment of 600 reais ($115). Under new provisions, families will get additional amounts depending on their number of children and their ages, as well as an additional amount for pregnant women.<\/p>\n\n\n\n
\u201cBolsa Familia is just a piece of the things we will do,\u201d Lula told a crowd in Brasilia. \u201cWe aren\u2019t promising that Bolsa Familia will resolve all the problems of Brazil\u2019s society. But together with it there must be a policy of economic growth, of job creation and transfer of income.\u201d<\/p>\n\n\n\n
The program had been a flagship of his previous governments, and helped tens of millions of people escape poverty. It was rebranded as Brazil Aid by former President Jair Bolsonaro during the COVID-19 pandemic.<\/p>\n\n\n\n
Alberto Ramos, Goldman Sachs\u2019 chief Latin America economist, wrote in an emailed statement that he anticipates further headwinds for Brazil\u2019s economy in the first half of 2023, pointing to high interest rates, elevated household debt levels, declining job creation and soft business and consumer confidence.<\/p>\n\n\n\n
GDP expanded 2.9% in the full year of 2022, down from the 5% rebound registered in 2021 following the pandemic-induced recession, according to the statistics institute.<\/p>\n\n\n\n
Vale forecasts growth of just 1% this year, with industry sinking further and agribusiness almost wholly responsible for keeping overall GDP in positive territory.<\/p>\n\n\n\n
\u201cOur challenge we have now is to make the economy resume growth,\u201d Lula said in Brasilia.<\/p>\n","protected":false},"excerpt":{"rendered":"
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