Brazil’s political crisis has intensified, while its economic conditions have continued to deteriorate. The Brazilian economy is expected to contract further in 2016 as the statistical carryover for this year’s economic growth is -2.5%, according to Nordea Bank. Investment and private consumption are particularly expected to shrink.
Both these components are likely to keep performing poorly in 2016 as capacity utilization and sentiment remain low, labor market conditions continue to worsen and as inflation and interest rates are high, noted Nordea Bank. Meanwhile, net exports are likely to continue contributing to the economic growth due to weak demand at home and a weaker real.
Brazil’s Preside Rousseff is likely to be impeached in 2016. With a new president, sentiment in the country is likely to rebound slightly. Along with that, rising prices of commodity will result in economic activity to stabilize by Q4 2016.
“We expect growth of -3.5% this year, and a small stabilisation to 0.3% in 2017”, added Nordea Bank.
In August of this year, the Summer Olympics will be held in Rio. As most of the infrastructure in completed, its impact on the Brazilian economy is likely to reply on how it will impact retail sales. The Olympics is expected to have just a small impact on GDP because of the large size of the economy, noted Nordea Bank.
