Brazil recession to continue in 2016
January 15, 2016, 2:55 pm

A woman walks past a store’s showcase in the city of Sao Paulo, Brazil. Rampant inflation has frustrated the Rousseff administration. In 2015, the inflation rate reached almost 11 per cent [Xinhua]

While the difference may not seem big at first glance, it however reflects Brazil’s recession for much of 2015 during which the economy contracted by 3.75 per cent.

Analysts say that the economy is at its weakest since before World War II.

One of the biggest challenges facing the embattled President Dilma Rousseff is persistent inflation which reached just shy of 11 per cent in 2015.

The central bank says that the ideal inflation rate to spur economic growth is 4.5 per cent, but the government has struggled for the past three years to bring that figure under control.

The central bank also revised downward its forecast for economic growth in 2017, which had initially been at one per cent. Earlier this week, the bank revised the figure down to 0.87 per cent.

Exacerbating the economic crisis, the central bank’s IBC-Br economic activity index, which gauges the health of the farming, industry and service sectors, dropped 0.52 per cent from October to November.

Last month, BACEN said the economic activity index in October had fallen 0.63 from September.

Year on year, activity has fallen by more than 6.38 per cent.

The economy has frustrated Rousseff, who is facing calls from opposition groups to resign her presidency.

She rounded out last year by promising Brazilians that her cabinet would work toward “restoring fiscal balance, reducing inflation and urgently resuming economic growth”.

In late December, she appointed a new finance minister – political ally Nelson Barbosa, who said he is committed to improving regulatory frameworks to “create new opportunities for jobs and improve the economy”.

One challenge awaiting Barbosa, a former planning minister, is how to overcome growing unemployment.

It is estimated that the Brazilian economy may have lost as many as one million jobs in 2015 alone.

According to Reuters, the unemployment rate grew to 9.0 per cent in the third quarter from 8.6 per cent in second.

Barbosa will also have to convince an already jittery public after consumer and business confidence plummeted in 2015 following a series of austerity measured and higher interest rates implemented by Rousseff’s cabinet.

The BRICS Post with inputs from Agencies