Brazil’s economy is expected to contract by nearly one-quarter this year in dollar terms due to a depreciating currency and a deepening recession, according to government figures.
Brazil’s planning ministry revealed in a budget presentation that gross domestic product was expected to be $1,812bn this year, down 23 per cent from $2,353bn a year earlier, as President Dilma Rousseff tries to unwind a multiyear stimulus programme that has left government finances bleeding red.
“We know that in a populist model you have a fake sense of prosperity in the short term,” said Alberto Ramos, economist with Goldman Sachs. “So after populism comes the adjustment and the adjustment is basically just giving back all these fake gains.”
Brazil’s economy is facing a hangover with the end of the commodities supercycle and government efforts to prolong a consumption and credit-led boom.