MercoPress. South Atlantic News Agency

Brazil expected to contract 3.5% this year, says Central Bank survey

The government reported last Thursday that Brazil's economy contracted 3.8% in 2015, marking the worst economic downturn in the past 25 years.

Analysts expect Brazil's economy to contract by 3.5% this year, the Central Bank said Monday. Private sector economists, who expected the GDP to contract by 3.45% in the previous weekly survey, also raised their inflation projection from 7.57% to 7.59%.

 The GDP figures come from the Boletin Focus, a weekly Central Bank survey of analysts from about 100 private financial institutions on the state of the national economy. Analysts, however, expect the situation to improve in 2017, when Brazil's economy will grow a tepid 0.50%.

The government reported last Thursday that Brazil's economy contracted 3.8% in 2015, marking the worst economic downturn in the past 25 years.

Latin America's largest economy, mired in a deep recession, had expanded by just 0.10% in 2014. Brazil's per capita GDP fell 4.6% to 28,876 reais (US$7,425) in 2015, compared to the prior year.

The economy contracted 1.4% in the fourth quarter, compared to the previous quarter, when Brazil's economy had contracted by 1.7%. GDP, however, fell 5.9% in the fourth quarter of 2015, compared to the same period in 2014.

If the 2016 forecast turns out to be correct, Brazil's economy will contract for two years in a row for the first time since 1930.

The government has responded to the economic downturn by bolstering public finances via budget cuts and tax hikes. Spending is being slashed by US$5.78 billion this year.