Brazil Registers in 2015 the Worst GDP Retraction Since 1990

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Economists had predicted a decline in the Brazilian Gross Domestic Product (GDP) for 2015, but the official amount released on Thursday by the IBGE (Brazilian Statistics Agency) was gloomier than forecasted. According to the IBGE, Brazil’s GDP registered a decline of 3.8 percent in 2015, totaling R$5.904 trillion, the greatest decline since 1990.

The 2015 data shows a retraction in all but one sector of the Brazilian economy, with the highlight going to the capital goods investments (GFCF -Gross Formation of Fixed Capital), down by 14.1 percent. The retraction say IBGE analysts was due to a decline in imports as well as the reduction in domestic capital goods production and the negative performance of the construction sector.

The only sector that registered a growth was agribusiness, up by 1.8 percent. The other two sectors, industry and services, retracted by 6.2 percent and 2.7 percent respectively.

The GDP per capita in the country closed down by 4.6 percent in relation to 2014, at R$28,876. Household consumption, which in the past was one of the factors which fueled the economy, fell by 4.6 percent in relation to the previous year due to the deterioration of income and employment indicators.

Due to the 42 percent foreign exchange devaluation registered last year, Brazilian products became more attractive to foreign markets and the country’s exports, grew by 6.1 percent. According to the IBGE products such as iron ore, petroleum and grains were the items that most contributed to the foreign sector growth.

The devaluation, however, affected the imports of goods and services negatively last year, with the sector registering a 14.3 percent retraction.

Brazil investment rate for 2015 was 18.2 percent of the GDP, while savings rate was 14.4 percent, both below that observed the previous year.