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Brazil' inflation hit a 13-year high in 2015, and double the government's target

Saturday, January 9th 2016 - 11:26 UTC
Full article 6 comments
Annual inflation reached 10.67% in 2015, the government said Friday, the highest rate since 2002 and more than double the government's 4.5% target. Annual inflation reached 10.67% in 2015, the government said Friday, the highest rate since 2002 and more than double the government's 4.5% target.

Brazil's inflation rate hit a 13-year high in 2015, in what analysts called the result of years of economic mismanagement, worsened by a political crisis in Latin America's biggest economy. Annual inflation reached 10.67% in 2015, the government said Friday, the highest rate since 2002 and more than double the government's 4.5% target.

 Brazil, which hosts the summer Olympic Games in August, is struggling through a deep recession and political instability after impeachment proceedings were launched against President Dilma Rousseff.

In recession since the second quarter of last year, Brazil is suffering rising unemployment and a drop in investor confidence fueled by the impeachment proceedings against Rousseff and by a scandal in state oil firm Petrobras. The IMF expects Brazil will stay in recession in 2016. The World Bank on Wednesday forecast a 2.5% contraction this year.

The Rousseff government has revised its 2016 budget targets five times. It is now expected to post a $31 billion deficit. The political chaos swirling around Rousseff has added to Brazil's economic woes, with the national currency, the real, down one-third against the dollar in 2015.

Last year's inflation figure, while high, was still slightly below market expectations of 10.72% and the central bank's last forecast of 10.8%.

“Prices were artificially held down, but prices for services have risen by nearly nine percent over the past two months,” said analyst Andre Leite of financial group TAG Investimentos. “That shows that a lack of budgetary control by the government has ended up influencing the market.”

Rousseff admitted Thursday her government underestimated the magnitude of the economic crisis over recent years.

“The biggest mistake was failing to see that the crisis was so big in 2014, failing to gauge the magnitude of the economic slowdown due to internal and external problems,” she said, as quoted by the Estado de Sao Paulo newspaper.

She cited economic uncertainty in China and severe drought in Brazil in explaining the slowdown in her own country, the world's seventh biggest economy.

Rousseff's said her top priority this year would be to rein in inflation and bring Brazil back to a budget surplus. Touching on the delicate issue of public spending reforms, she said changes to the pensions system should be considered as life expectancy is rising.

Leite said the country's deficit was to blame for soaring inflation, which has prompted the central bank to raise interest rates. “But the government should also cut spending on its mafia of public employees, and it is not doing so,” the analyst said.

Categories: Economy, Brazil.

Top Comments

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  • Skip

    “She cited economic uncertainty in China and severe drought in Brazil in explaining the slowdown in her own country, the world's seventh biggest economy.”

    And yet we managed 2.5% growth with the exact same problems.

    Thinking it might be more than that.... a LOT more!

    Jan 09th, 2016 - 01:31 pm 0
  • yankeeboy

    They'll never be able to control inflation until they strip out all the massive subsidies and stop giving free money to poor people so that they can pretend they're part of the middle class.

    They're doomed.

    The best part of this is there barely any Brazilian tourists around anymore.

    Jan 09th, 2016 - 02:47 pm 0
  • Englander

    No doubt Bras.....whatever his name, is will blame it all on foreigners.

    Jan 09th, 2016 - 03:01 pm 0
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