Brazil’s GDP posts steepest annual decline since 1990
Print Edition
BRAZIL’S economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed yesterday, setting the stage for what could be the country’s deepest recession on record.
Brazil’s gross domestic product shrank 3.8 percent in 2015, capped by another steep contraction in the fourth quarter, said statistics agency IBGE.
The 2015 slump was the steepest annual drop for Brazil’s GDP since 1990, when hyperinflation and debt default blighted the country’s recent return to democracy.
Brazil was hit in late 2015 by the disastrous burst of a major mining dam and the biggest oil strike in 20 years. Both struck an economy weakened by a paralyzing political crisis, rising inflation and interest rates, and a sharp drop in the price of its commodity exports.
The outcome was the lowest economic growth rate of all G20 countries and one of the highest inflation rates, at 10.7 percent.
This year’s recessionary outlook is nearly as severe, with a 3.45 percent downturn forecast for 2016, according to economists surveyed by the central bank.
Back-to-back annual recessions of this magnitude would amount to the longest and deepest downturn for Brazil since records began in 1901.
A private survey yesterday suggested services activity contracted in February at the steepest rate on record, adding to evidence that the recession had yet to hit bottom.
“We will probably see a similar contraction this year. There are no growth engines yet. The only one could be exports, but Brazil’s economy is relatively closed so we don’t see that taking us out of this hole,” said Joao Pedro Ribeiro, Latin America economist with Nomura Securities.
Latin America’s largest country, once the world’s seventh-biggest economy, had already been underperforming since 2011, the year President Dilma Rousseff took office. A sharp rise in government spending and subsidized credit underpinned the labor market until 2014, at the cost of fueling inflation and eroding government finances.
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