Business Cycles and Concepts

Business Cycles and Concepts

Chant Long

AIU

Brazil’s GDP

Real GDP Growth | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |

| 1.1% | 5.7% | 3.2% | 4.0% | 6.1% | 5.2% | -.3% | 7.5% |

| 2011 | 2012 | 2013 | 2014 | 2015 | | | |

| 2.7% | 1.0% | 2.5% | .3% | 1.4% | | | |

Brazil, which is Latin America’s largest economy, has economists on the verge of their seats waiting to see if Brazil’s economy will diminish this year. The speculation that the Federal Reserve is moving closer to raising borrowing costs is the issue that most see as the reason for slow economic growth. The currency fell 1 percent to 2.8 per U.S. dollar at the end of the trade in Sao Paulo, the biggest drop among 16 major counterparts tracked by Bloomberg (Pacheco, 2015). A survey from the central bank analysts projected that Brazil’s GDP will shrink .42 percent this year in its first annual contraction since 2009. Underscoring the pessimism, net overseas holdings of futures contracts betting against Brazil rose to 36 ½ billion. The outlook of Brazil’s economy is bleak because it is a combined effort of negative sentiment that should not improve much in the near term (Pacheco, 2015).

The currency has lost 22 percent in the last six months, mostly among 16 major currencies, which are tracked by Bloomberg. This drop has many concerned that a stalled Brazilian economy and fiscal weakness will lead to a sovereign credit downgrade (Pacheco, 2015). The government is unwinding tax breaks as it strives to boost confidence and stop debt from expanding. The goal in Brazil is to neutralize the gross debt and the government wants to achieve this in a 10-month timeframe. Gross debt increased to 63 percent of GDP from 57 percent of GDP in 2013 (Pacheco, 2015).

Inflation expectations started to converge closer to the 4.5 percent midpoint of the preferred range. The economists surveyed by the central bank expected the prices to rise 7.27 percent this year and 5.6...