Brazil’s Economy Falls 3.8% in 2015

Brazil’s economy shrank by 3.8% in 2015, according to the national statistics agency IBGE.

The world’s seventh-largest economy has fallen sharply in recent months due partly to low commodity prices and sluggish global growth.

Political paralysis has hampered Brazil’s efforts to tackle its economic problems, including a budget deficit that has reached 10.8% of GDP.

President Dilma Rousseff is trying to head off the opposition’s efforts to impeach her over alleged accounting irregularities, which means she cannot afford to alienate supporters in her Workers’ Party by cutting spending or raising taxes.

Investigations are also continuing into a high-level bribery and corruption scandal involving major construction projects.

Dilma Rousseff’s predecessor as president, fellow Workers’ Party politician Luiz Inacio Lula da Silva, is one of the people under investigation.

Brazil’s economic performance in 2015 vies with that of Russia as the worst in a major economy for 2015. Official figures for Russia’s 2015 GDP have not yet been released.

It was also Brazil’s worst set of figures since 1990.

Analysts say Brazil is now caught in a classic case of stagflation – a combination of high inflation and a recession.

On March 2, policymakers at Brazil’s central bank voted to keep the benchmark Selic interest rate at its current level of 14.25%.

High interest rates have traditionally been used in Brazil as a policy tool to keep inflation in check. However, inflation has surged in any case, now standing at 11%, while high rates are hurting businesses.