Recession deepens in Brazil, world's seven largest economy

Brazil's economy contracted a greater than expected 1.7 percent in the third quarter, deepening the recession in the world's seventh largest economy, officials figures showed Tuesday.

The bad news comes amid a paralyzing political crisis that has delayed action on measures needed to stabilize the economy.

Experts surveyed by the business daily Valor were expecting a 1.3 percent contraction in the third quarter, as compared to the previous quarter.

"Brazil's economy is in intensive care and will remain sick in the upcoming quarters," Andre Perfeito, chief economist of Gradual Investimentos in Sao Paolo, told AFP.

"It has not yet bottomed out, and instead will worsen at least until the middle of next year," he said.

Since entering recession in the second quarter, Latin America's largest economy has gone from bad to worse: in the first nine months of the year, GDP contracted by 3.2 percent compared to the same period last year, the steepest decline in 19 years.

It shrank 0.8 percent in the first quarter, then 2.1 percent in the second, according to revised figures released Tuesday by the Brazilian Institute of Geography and Statistics.

From July to September, it contracted 4.5 percent as compared to the same quarter a year ago -- the worst quarterly performance since 1996.

The markets are expecting the economy to shrink by 3.19 percent this year, followed by negative 2.04 percent growth in 2016.

If that happens, it would mark the deepest recession in 85 years, going back to the Great Depression years of 1930-31.

"What worries me the most is the drop in investments," said Perfeito.

Confronting Brazil is a significant drop in consumption, rapidly deteriorating public accounts, inflation that is now near 10 percent and rising with the real's depreciation against the dollar, and growing joblessness.

All that is set against the backdrop of a deepening political crisis and plummeting public support for President Dilma Rousseff.

Caption : The news that Brazil has slipped into recession will raise fears of a repeat of the protests which overshadowed the build-up to this year's FIFA World Cup ©AFP/Getty Images