GDP drop in 2015 spells worse times ahead for Brazil, experts warn

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According to the official statistics agency of Brazil IBGE, the country had the worst performance of any G20 nation, as the economy slowed down; businesses made 1.5 million people redundant and put all investment projects on hold.
In 2015, gross domestic product (GDP) dropped by 3.8%, the country’s longest and deepest decline since Brazil began keeping records in 1901, when the economy was struggling with debt default and hyperinflation. The outlook for this year doesn’t look to improve dramatically. With a central bank survey forecasting a further contraction, the start of what officials predict could be Brazil’s worst recession on record, experiencing more than a 7% drop of GDP during that time.

A current political crisis, rising inflation and drop in prices of key goods and services exports have spelled disaster for South America’s largest economy. The devastating burst of a main mining dam and a large oil strike added even more strain to the economy in 2015.

Brazil’s government said the downturn had been expected and added that it was focused on boosting the economy this year. “The government has taken all the necessary measures for an economic recovery,” the Finance Ministry said in a note.

Economists forecast that unemployment rates and non-performing loan (NPL) are likely to rise even more as the recession continues throughout the rest of the year. However it’s not all negative, stocks on the exchange in Sao Paulo posted sharp gains despite the poor GDP data, financial experts state that banks seem to be well capitalised to endure the crisis however could tighten credit to stay safe, that could prolong economic recovery.