Despite the strike of the truckers, the economy grew

BRASILIA – Despite the massive national strike by lorry drivers who paralyzed the country in May, the economy of

The accelerated light in the second quarter continues with a slow and uneven recovery as the crucial presidential election approaches in October.

Brazil's gross domestic product (GDP) grew by 0.2% compared to the first quarter and 1% year-on-year, the Brazilian Institute of Geography and Statistics (BIM) reports yesterday.

On the other hand, unemployment fell to 12.3% in the second quarter, in line with market expectations.

Previously, economists had a more pessimistic growth forecast for the second quarter, stating that it would be about 0.1% higher than in the previous quarter and 1.1% compared to a year earlier.

This analysis was based on a revised downward expansion of 0.1% in the first quarter compared to the previous three months, which was compared with a previously announced advance of 0.4%.

Now, according to the data reported yesterday, the economic expansion in the second quarter was the fastest in Brazil since the third quarter of 2017.

Brazil emerged from a period of two years of recession that year, with an expansion of 1%.

But yesterday's report "consolidates the idea that the recovery in 2018 has gained momentum," said Itaú Bank economist Arthur Passos.

In that sense, the truckers' strike had a decisive influence.

Truck drivers who protested at high diesel prices blocked major roads in the last weeks of May, restricted supplies to various industries and caused a widespread lack of products.

The 9-day strike caused shortages of fuel and food and delayed exports.

That, combined with the political uncertainty that the country is experiencing, caused the first decline in capital expenditures in the second quarter after four quarters of growth, despite the fact that interest rates remained at historic lows. The industrial sector also contracted and ended three consecutive quarters of growth.

Spending on households, which until now stimulated the recovery of the economy, rose by only 0.1% in the quarter, under pressure of a rise in inflation as a result of the truckers' strike.

On the demand side, the most affected item was investment (gross fixed capital formation), which was 1.8%.

The distrust of investors is fueled by polls that show that up to now no candidate identified with fiscal adjustment policy is one of the favorites for the October presidential election.

A weekly survey conducted by the Central Bank among analysts showed that the Brazilian economy is likely to grow 1.47% this year, slightly less than the official government forecast of 1.6% and well below the estimate of plus or minus 2, 5% before the protests started at the end of May.

According to the concept of the 2019 budget that was announced yesterday, the government is projecting GDP growth of 2.5% for the coming year.

The economic outlook was further hampered by the serious financial problems of other large emerging countries such as Argentina and Turkey, which had a strong impact on the Brazilian currency. In fact, so far this year, the real depreciated more than 20% against the dollar.

The Brazilian currency thus fell to the lowest level in two years and the meager economy feeds the frustration of Brazilians with their leaders, making the outcome of the presidential election in October extremely unpredictable.

Schulz visited the former president

The former leader of the German Social Democrats and former President of the European Parliament Martin Schulz yesterday visited Luiz Inacio Lula da Silva in prison where the former Brazilian head of state, favorite of the presidential election in October, has been imprisoned since April. "I am here to express my solidarity with the PT (Party of Workers) and its candidate," Schulz said after leaving the prison where Lula is held in Curitiba, in the south of Brazil. "It is clear that the circumstances of this trial against Lula cast doubt on this process," said the former leader of the German Social Democratic Party (SPD).

Reuters offices and AFP

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