Brazil caught in deep economic morass; GDP fell 3.8% in 2015
Brazilian GDP fell 3.8 per cent in 2015, the government said on Thursday, indicating the Latin American giant is headed for its worst recession in at least a century. The latest gloomy news from Brazil was no surprise, but the severity underlined the depth of problems facing President Dilma Rousseff's government as it battles both declining economic output and 10.67 per cent inflation. The state statistics office said 2015 registered the worst single annual fall in GDP since 1990, when the economy dipped 4.3 per cent.
With the International Monetary Fund predicting a further 3.5 per cent shrinkage this year, Brazil appears to be well into a recession of record length and depth. The GDP results condemn Brazil, currently the world's seventh biggest economy, to the bottom bracket for Latin America, where Venezuela is the worst performer with a 10 percent plummet in GDP, according to the IMF. Leading the slide was the industrial sector, which was down 6.2 per cent in 2015. In the last quarter of 2015 the all-important mining sector was down 6.6 per cent, reflecting the worldwide slump in commodity prices and demand for Brazil's iron ore and other raw materials.
Services were down 2.7 per cent for the year. Brazil's ugly GDP picture is only part of a wider economic and political mess amounting to a stunning fall from grace. The country of 204 million people was only recently being touted as the emerging markets giant that had finally found its feet -- with the Olympic Games due to take place in Rio this August symbolizing that new status. GDP grew steadily through the 2000's, except for a dip after the last 2008 global financial meltdown, hitting 7.5 per cent growth in 2010, 3.9 per cent in 2011, 1.9 per cent in 2012 and 3.0 per cent in 2013. The leftist government's generous spending programs were credited with lifting millions out of severe poverty and the country's mineral and agricultural riches were in hot demand in China. The party has now come to a brutal end and Rousseff -- beset by an impeachment attempt and a huge, volatile corruption scandal that has sucked in many top political and business figures -- appears to have few options.
On Wednesday, the Central Bank maintained its benchmark interest rate at 14.25 per cent, but that has not stopped inflation hitting double digits, while unemployment is now at 7.6 per cent and rising. All three main credit rating agencies have downgraded Brazil to junk status, warning of slow recovery and political uncertainty.