World Economy

Brazil Economy to Shrink 3.7%

Brazil Economy to Shrink 3.7%Brazil Economy to Shrink 3.7%

Analysts expect Brazil’s economy to contract by 3.7% this year, with inflation hitting 10.7%, the Central Bank said.

The gross domestic product and inflation forecasts 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, Foxnews reported.

The government started using the survey in preparing its own forecasts this year.

Last week, analysts projected that Brazil’s economy would contract by 3.62% and the inflation rate would come in at 10.61%.

Analysts now are forecasting that Latin America’s largest economy will contract by 2.8% in 2016, with the inflation rate falling to 6.87%. If the forecasts turn out to be accurate, Brazil will go through two consecutive years of negative GDP growth for the first time since 1948.

Brazil, in a technical recession with GDP contracting for three consecutive quarters, has had its sovereign debt lowered to junk status by Standard & Poor’s and Fitch Ratings in recent months.

Those downgrades have occurred even though analysts note that Brazil’s foreign currency reserves are far in excess of its international liabilities.

The South American giant’s economic growth has been hampered by spending cuts implemented by President Dilma Rousseff’s administration to reduce the budget deficit and control inflation.

Joaquim Levy resigned as Brazil’s finance minister last Friday amid the struggling economy and a push by some in congress to impeach Rousseff.