Confirmed: Brazil faces its worst economic plunge in 25 years

Analysts expect Brazil’s economy to contract by 2.95% this year after contracting by 3.71% in 2015, marking the biggest drop in economic output in 25 years, the Central Bank said on Monday. The first survey of analysts released this year shows that private sector economists expect the inflation rate to hit 6.87% in 2016.

Last week, analysts said they expected Brazil’s economy to contract by 2.81% in 2016, with inflation reaching 6.86%.

The gross domestic product (GDP) and inflation forecasts come from the Boletin Focus, a weekly Central Bank survey of analysts from about 100 private financial institutions on the state of the national economy. The government started using the survey in preparing its own forecasts last year.

Brazil, in a technical recession with GDP contracting for three consecutive quarters, has had its sovereign debt lowered to junk status by Standard & Poor’s and Fitch Ratings in recent months.

Those downgrades have occurred even though analysts note that Brazil’s foreign currency reserves are far in excess of its international liabilities.

Latin America’s largest economy growth has been hampered by spending cuts implemented by President Dilma Rousseff’s administration to reduce the budget deficit and control inflation.

Joaquim Levy resigned as Brazil’s finance minister on Dec. 18 amid the struggling economy and a push by some in Congress to impeach Rousseff. His replacement – Nelson Barbosa, who had been heading up the Planning Ministry – was critical of some of the austerity measures implemented by his predecessor.

Merco Press

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MercoPress is an independent news agency started in 1993 which focuses on delivering news related to the Mercosur trade and political bloc, and member countries, covering an area of influence which includes South America, the South Atlantic and insular territories. MercoPress offers an update of the main events which model the Mercosur integration process, the current customs union, its influence on the main players of the region as well as the relations with other economic-political spaces.

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