Brazil economy slows decline on government spending surge

Brazil’s economy shrank for a fifth straight quarter in early 2016, but the drop was smaller than forecast due to heavier government spending in the months before a vote to impeach President Dilma Rousseff.

Brazil’s economy shrank 0.3 percent in the first quarter from the fourth quarter, statistics agency IBGE said on Wednesday. The contraction was smaller than the 0.8 percent drop expected by economists in a Reuters poll and the 1.3 percent decline in the previous quarter.

The smaller drop, however, did not stir economists’ hopes for an imminent economic rebound.

Although some analysts noted they could trim their forecasts for this year’s contraction, currently seen at near 4 percent, they said the positive surprise was largely a result of unsustainable government expenditures. Public spending grew 1.1 percent in the quarter, the most since 2013.

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