The Brazilian economy is heading for the recession | Internationale

Economic activity in Brazil contracted slightly during the first three months of June, A central bank indicator released on Monday said Latin America's biggest economy could have fallen into recession.

The central bank's IBC-Br economic activity index, the leading indicator of gross domestic product (GDP), fell 0.13% in the second quarter, after a decline of 0.68% in the three months to March.

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A recession is usually defined as two consecutive quarters of negative economic growth. If the IBC-Br index is supported by official GDP data this month, Brazil will have entered recession for the first time since the one recorded in 2015-2016.

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The Brazilian economy has been hit this year by high unemployment, weak industrial production, the economic problems of neighboring Argentina and the gloomy prospects for global growth.

Brazil's GDP contracted by 0.2% in the first quarter and is expected to grow by only 0.8% this year, according to the central bank, the government, the International Monetary Fund and the agreed market forecasts. Second quarter figures will be released August 29.

"For now, we are keeping our full estimate for 2019 at 0.5%, with a slight upward bias," said Mauricio Oreng, senior strategist at Rabobank in Sao Paulo. "We are looking for a slight rebound in the second half of the year … but what we can say for sure is that the economy is still anemic and slow."

Brazil's currency, the real fell nearly 1.5% in Monday morning trading and the Bovespa stock index has depreciated. The central bank reduced its benchmark rate by 50 basis points to a record low of 6.00% at the end of July. A weekly survey of the central bank of financial institutions on Monday revealed that economists expected a reduction of this rate to 5.00% by the end of the year.

The central bank's IBC-Br economic activity index actually rose 0.30% in June since May, which is higher than the 0.10% expected in a survey of economists Reuters, but not enough to prevent the quarterly decline. This is the first time this year that the index has increased two months in a row, which suggests that the worst could have happened. The central bank had estimated in the minutes of its last political meeting that economic growth was probably sluggish or slightly positive in the second quarter.