Brazil economy slows in Jair Bolsonaro's first year
Brazilian President Jair Bolsonaro AFP

The Brazilian economy slowed in President Jair Bolsonaro's first year in office, according to official data released Wednesday, disappointing news for markets that had bet on the far-right leader to engineer an economic take-off.

Brazil's economy, the largest in Latin America, grew 1.1 percent in 2019, down from 1.3 percent in each of the previous two years, said the national statistics institute, IBGE.

Growth for the fourth quarter of the year came in at 0.5 percent.

Bolsonaro, who has been dubbed a "Tropical Trump," took office on January 1, 2019, after storming to a shock election win in a Brazil fed up with corruption scandals and coming off a brutal recession.

Brazil's economy had its worst-ever recession in 2015 and 2016, shrinking a whopping 3.5 percent and 3.3 percent, respectively.

"We have had three years of positive results since, but GDP has still not recovered from the drop of 2015 and 2016, and is at the same level as the first quarter of 2013," IBGE official Rebeca Palis said in a statement.

Bolsonaro, a former army captain who ran as a political outsider -- despite having served 28 years in Congress -- vowed during his presidential campaign to jump-start the economy, winning the support of the business sector.

Giving his economic guru Paulo Guedes vast power at the head of the economy ministry, he began implementing a sweeping agenda of pro-market reforms, austerity cuts and privatizations, including a long-sought pension reform that passed in October.

- Tough 2020 ahead -

Soon after Bolsonaro took office, analysts forecast economic growth of 2.5 percent for the year.

The final figure came in at barely half that.

"It was a cold bath of reality," said economist Victor Beyrute of Guide Investimentos.

"Brazil is going through a transition period, and the problem can't be solved in a year."

And 2020 is shaping up to be another tough year for Brazil, the world's ninth-biggest economy, according to International Monetary Fund figures.

Consulting firm Capital Economics said the latest data "masked a sharp loss of momentum late in the quarter," and warned of "growing headwinds from the effects of the coronavirus."

The government's current forecast is for 2.4-percent economic growth this year, but markets are predicting 2.17 percent. Capital Economics revised its own forecast down to 1.3 percent.

Brazil, which has confirmed two cases of the new coronavirus, is particularly exposed to the economic impact of the disease because of its close ties with China, its largest trading partner.

It also ended 2019 with a string of disappointing news.

Industrial production shrank 1.1 percent for the year after two years of growth, and big companies snubbed a major auction of Brazilian oil blocks in November over concerns about transparency.

- Rate cut? -

The central bank said Tuesday it was "closely monitoring the impacts of the coronavirus outbreak," and was prepared to cut its benchmark interest rate again when it meets later this month.

The bank has already cut the rate to a series of record lows in a bid to revive economic growth.

It lowered it to 4.25 percent in February, the fifth straight decrease since July 2019.

At the time, it indicated the loosening cycle was coming to an end, but its new statement made clear it was considering another rate cut.