Latin America’s largest economy shrank for the second year in a row in 2016 as the country continues to grapple with its worst recession on record.

Data on Tuesday showed Brazil’s gross domestic product contracted for the eighth straight quarter in the three months to December, shrinking 0.9 per cent from the previous quarter.

The figure was steeper than the 0.5 per cent decline economists had forecast and left the country’s overall GDP down 3.6 per cent for the full year following a 3.8 per cent drop in 2015.

The back-to-back annual contractions make this Brazil’s longest and deepest recession since records began more than a century ago. Discontent over the state of the economy was a major factor that ultimately led to the fall of former President Dilma Rousseff last year and to the low approval ratings of her successor, President Michel Temer.

While the real and the Brazilian stock market have been rallying on hope that Mr Termer
would be able to revive what was once one of the fastest growing emerging market economies, recovery is proving to be slower than expected.

Economists polled in the Brazilian central bank’s weekly survey are forecasting only a 0.5 per cent growth in GDP for 2017.

“In real terms, GDP is now 9% below its pre-recession peak,” said Neil Shearing, chief emerging markets economist at Capital Economics.

“This is comfortably the worst recession in recorded history. However, we suspect that Q4 should also mark the end of the recession. For a start, many of the one-offs that pulled down GDP in Q3 and carried over into Q4 have faded. Auto production is growing once again. More fundamentally, inflation is falling, interest rates have been lowered and financial conditions have eased.”

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