Brazil faces worst recession since 1901

Bloomberg News has reported that Brazil won’t return to growth until at least 2018 after two years of recession and one of stagnation, according to the International Monetary Fund. This would mark the first time in over a century that Latin America’s largest economy fails to expand for that long.

On Tuesday, the IMF cut Brazil’s 2017 economic forecast to stagnation from 2.3% growth as it updated its World Economic Outlook, which was last published in October. Gross domestic product will shrink 3.5 % this year after contracting 3.8 % in 2015. That would be the first time since 1901 that Brazil has back-to-back recessions deeper than 3%, according to data from the government’s economic research institute, known as IPEA.

Confidence has sunk to record lows in Brazil, depressing both consumption and investment as bottoming prices for commodity exports provide no relief, said the report.

Earlier this month, Bloomberg News had reported that Brazil’s economy will contract more than previously forecast and is heading for the deepest recession since at least 1901.

Citing a survey of analysts, Bloomberg said that sinking economic activity and confidence, and the country’s political crisis – including impeachment proceedings and an expanding corruption scandal – would result in a 2.95% reduction in the economy. This was according to the weekly central bank poll of about 100 economists.

Analysts lowered their 2016 growth forecast for 13 straight weeks and estimate the economy contracted 3.71% last year.

Bloomberg
notes that Brazil’s policy makers are struggling to control the fastest inflation in 12 years without further hamstringing a weak economy.

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