Brazil’s economic activity unexpectedly shrinks in January

Walter Brandimarte – Bloomberg Business, 03/1/2016

Brazil’s economic activity unexpectedly contracted in the beginning of 2016 and economists forecast a deeper recession for this year as a political stalemate nearly paralyzes the country.

The central bank’s IBC-BR index, which is often taken as a proxy for Brazil’s GDP report, shrank 0.61 percent in January, more than forecast by all 25 economists surveyed by Bloomberg, whose median estimate was for a 0.2 percent expansion. Economic activity as measured by the index has been declining for 11 consecutive months and, with Monday’s negative surprise, some economists are already cutting their forecasts for Brazil’s economic performance this year.

Among those, Goldman Sachs revised its 2016 forecast for the IBC-BR to a deeper contraction of 3.6 percent from 3.2 percent. “We expect the economy to continue to face strong headwinds,” the bank’s senior economist Alberto Ramos wrote in a note to client, citing a long list of obstacles including tight financing conditions, high inflation, rising unemployment, and political uncertainty.

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