Brazil scrapes out of recession on government spending

BRASILIA, Nov 28 (Reuters): Brazil's economy crawled out of a recession in the third quarter as public spending rose before presidential elections, suggesting growth could be short-lived as the government plans to tighten its budget.

The economy grew 0.1 per cent in the third quarter from the previous period, resuming expansion after two consecutive quarters of contraction, government statistics agency IBGE said on Friday. The result missed the median forecast of 0.3 per cent growth in a Reuters poll of 36 analysts.

Third-quarter expansion was mostly driven by a steep 1.3 per cent increase in government spending. That stimulus is set to end as newly re-elected President Dilma Rousseff seeks to restore market confidence and avoid a credit-rating downgrade.

"Brazil is limping rather than leaping out of recession," said Neil Shearing, chief emerging markets economist at London-based firm Capital Economics.

Brazil's economy has disappointed since 2011, growing less than half its annual average in the prior decade. Global demand for the country's commodities has cooled, inflation has remained stubbornly high and investor sentiment soured due to repeated, often erratic, government intervention in the private sector.