Report by Brazil

Since its previous Trade Policy Review in 2013, Brazil’s largely domestic demand-driven economy slowed down and entered a severe recession in 2015-16, triggered by deteriorating terms of trade and exacerbated by a bout of political uncertainty. Annual GDP growth dropped from 3% in 2013 to 0.9% in 2014 and then turned negative in 2015 and 2016 with consumption and gross fixed capital formation following a similar trend. The recession, one of the most severe in Brazil’s history, has been accompanied by a steep rise in inflation (8.7% in 2016) and unemployment (11.3% in 2016) as well as fiscal discipline challenges. While the Brazilian financial system was not significantly impacted by the economic downturn, domestic lending became more cautious and borrower demand decreased.