Brazil’s economy shrinks less than forecast in Q4

RIODE JANERIO /Bloomberg

Latin America’s largest economy contracted less than economists expected late last year as a boost in agriculture output helped offset an overall decline in production.
Gross domestic product contracted 1.4 percent in the three months ended in December, after a 1.7 percent drop the previous quarter, the national statistics institute said on Thursday in Rio de Janeiro.
The figure was better than the 1.6 percent decline estimated by 47 economists surveyed by Bloomberg, but it wasn’t enough to prevent Brazil’s GDP from sinking 3.8 percent in 2015, its greatest plunge in 25 years, according to data from the government’s economic research institute IPEA. “Slightly better than expected, but still a sizable contraction of the economy,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., said by phone. “There’s no indication of a recovery in the near-term.”
Investors have been holding back as political uncertainty swirls amid a sweeping corruption investigation and the central bank holds interest rates at their highest since 2006. A weakened currency has helped improve the competitiveness of exporters, which the government has said will help spur Brazil’s recovery.
Swap rates on the contract due in January 2017 rose 7 basis points to 14.13 percent at 9:11 a.m. local time.
The fourth-quarter headline GDP figure was buoyed by agriculture output, which rose 2.9 percent and helped offset a 4.9 percent decline in investment.
Consumer and investor confidence levels have rebounded this year from record lows, which would normally suggest that the economy is bottoming. The prolonged recession has made it tougher for the government to shore up its finances. Fiscal consolidation plans were met with resistance from an opposition emboldened by proceedings to impeach President Dilma Rousseff, as well as from coalition lawmakers incensed by initiatives to cut spending.