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The current recession in Brazil is now the longest since the 1930s and the situation still remains extremely challenging. The Brazilian economy illustrates signs of cyclical and structural weakness. GDP outlook for 2016 is weak. Still-muted domestic and external demand point to a contraction in GDP for 2016 of around -2.5%.
Inflation remains a severe problem for the Brazilian authorities and the latest data shows a y/y rate of 10.7%, the highest in the emerging markets. The severe declines in commodity prices pose significant structural challenges for Brazil. Political developments also a setback, with the on-going corruption scandal threatening to create more tension for the government over the coming months.
The only bright spot for Brazil is the external accounts which shows a notable improvement. The current account deficit contracted by nearly 1% over the course of 2015, with the deficit now printing around -3.3% of GDP.
