2014–2016 Brazilian economic recession
The Brazilian economy has been experiencing an economic recession since early 2014 that continues to this day.[1] The economic recession is also coupled with the political crisis in Brazil that has resulted in the Impeachment process against Dilma Rousseff in May 2016 and widespread dissatisfaction with the current political system. The economy has shrank by around 4.5% according to the Financial Times by the end of 2015 and is expected to shrink again in 2016.[2] Major economic reporters and journals such as The Economist have expressed concern about the future economic outlook of Brazil[3] while others speculate that this recession is the worst experienced in the history of the Brazilian economy since the Great Depression.
Definition
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According to a general economic definition, a recession is a negative economic growth for two consecutive quarters. It is also a business cycle contraction which results in a general slowdown in economic activity. Macroeconomic indicators such as GDP, unemployment and aggregate demand in Brazil have generally been falling since the first quarter of 2015 and even before, thus fulfilling the requirements for the current economic situation experienced to be considered a recession, though not a depression.
Unemployment
Before the recession, Brazil's unemployment rate fared around 6.8% for most of 2014 and has been generally increasing since February 2015, averaging 8.5% in that same year. Latin America’s largest economy has lost more than 1.5 million jobs throughout 2015, thus fueling public discontent against the political establishment and the political leadership of the Worker's Party and the president Dilma Rousseff, according to bloomberg.[4] The unemployment rate is expected to rise throughout the rest of 2016 at the same time GDP is falling.
Budget Deficit
Brazil is currently experiencing a fiscal crisis, and an increasing budget deficit, which, according to Bloomberg, has been "the largest-ever primary budget gap "..."as a two-year economic recession sapped tax collection while expenses grew further."[5] The government deficit has reached 5.8 billion reais (U$1.7 billion) during the first three months of 2016, the widest reported since December 2001. The two-year long recession can be explained by the decrease in government revenue from taxes, caused by the recession, while expenses from government have been growing constantly.[6]
Credit Rating
This is a table of contents of the credit ratings of the Brazilian economy according to Trading Economics.
| Agency | Rating | Outlook | Date |
|---|---|---|---|
| Fitch | BB | negative | May 5, 2016 |
| TE | 34 | negative | Apr 16 2016 |
| Moody's | Ba2 | negative | Feb 24 2016 |
| S&P | BB | negative | Feb 17 2016 |
Inflation
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References
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