Extended Recession in Brazil Increases Pessimism for 2017

12/01/2016 - 13h00

The 0.8% decline in the Brazilian G.D.P. (Gross Domestic Product) in the third quarter frustrated expectations that the country would overcome recession more quickly.

It is the seventh consecutive fall and the longest sequence of retractions verified by the IBGE, the Brazilian Institute of Geography and Statistics, since the beginning of the current G.D.P. series, 20 years ago.

The decline in activities occurred in all major economy groups (investment, industry, agriculture and cattle farming, services and consumption). The two first had already registered a positive performance in the second quarter.

The difficulty to overcome the crisis is making analysts forecast that the country's G.D.P will continue very low at the beginning of 2017.

Igor Velecico, an economist at Bradesco, believes that the G.D.P will fall even more in 2016 (3.6% instead of 3.4%) and will increase less than expected next year: 0.3% instead of 1%.

The Brazilian Central Bank reduced benchmark interest rates (Selic) for the second consecutive time to 13.75% per year. The reduction in interest rates is seen as crucial for the country to start growing again.

Translated by LLOYD HARDER

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