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Brazilian economy’s steep slide raises spectre of depression

Discussion in 'General Discussion' started by Joe, Mar 9, 2016.

  1. Joe

    Joe Full Member

    http://www.theglobeandmail.com/repo...n-2015-worst-drop-since-1990/article29007653/


    [​IMG]

    Brazil’s economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed on Thursday, setting the stage for what could be the country’s deepest recession on record.

    Gross domestic product (GDP) shrank 3.8 per cent last year, capped by another steep contraction in the fourth quarter , according to Brazilian statistics agency IBGE. It was the worst performance of any G20 nation in 2015.

    It was also Brazil’s largest annual contraction since 1990, when the country was struggling with hyperinflation and a debt default. The outlook for 2016 is nearly as bad, with a central bank survey forecasting a 3.45 per cent contraction.

    Back-to-back annual drops of that magnitude would amount to the longest and deepest downturn since Brazil began keeping records in 1901.

    Brazil is “replicating the lost decade of the ‘80s in just two years,” Goldman Sachs economist Alberto Ramos said in a research report. He added that the economy was close to an outright depression given that its contraction began nearly two years ago.

    A paralyzing political crisis, rising inflation and interest rates and a sharp drop in prices of key commodity exports have formed a toxic cocktail for Latin America’s largest economy. The disastrous burst of a major mining dam and the biggest oil strike in 20 years added further strain in 2015.

    Last year’s contraction matched market expectations in a Reuters poll. Yields on interest rate futures rose after the data was published, also reflecting a split central bank decision to leave interest rates unchanged on Wednesday.

    Stocks on the Sao Paulo exchange gained, as did the country’s currency, the real.

    Brazil’s government said the poor data had been expected and added that it was focused on boosting the economy this year. “We want 2016 to be a year of recovery for jobs, employment, income, with economic growth,” Labor Minister Miguel Rossetto said.

    However, a private survey on Thursday showed services activity in February fell at the steepest pace on record, suggesting the economy 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.​
     
  2. RDL

    RDL Guest

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