Brazil’s economy falters, but worse may be to come

Dilma Rousseff-led government takes austerity measures after latest drop in GDP confirms economic stall of South American and Brics powerhouse

The signs that Brazil's economy is in trouble have been visible for a while now, but the worst could be still to come. The figures published last month for gross domestic product in the first quarter of 2015 confirmed the absence of growth that has plagued Latin America's powerhouse for the past five years.

With GDP down by 0.2% since the new year - a fall of 1.6% compared with the same period of 2014 - Brazil has registered its worst result in six years. Even if it has actually fared better than the 0.5% drop forecast by the markets, the outlook for the world's seventh-largest economy nevertheless looks gloomy. The figures are bad enough to reduce the already limited room for manoeuvre available to the newly appointed and ever so orthodox finance minister, Joaquim Levy. Last month he announced far-reaching austerity measures, with cuts amounting to 69.7bn reals ($22.4bn), prompting an outcry from members of his own party, who want a more flexible line.