UPDATE 5-Brazilian economy's steep slide raises specter of depression

jueves 3 de marzo de 2016 15:50 GYT

(Adds definition of depression, Finance Ministry comments, updates market reaction)

By Silvio Cascione

BRASILIA, March 3 (Reuters) - Brazil's economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed on Thursday, setting the stage for what could be the country's deepest recession on record.

Gross domestic product (GDP) shrank 3.8 percent last year, capped by another steep contraction in the fourth quarter , according to Brazilian statistics agency IBGE. It was the worst performance of any G20 nation in 2015.

The annual contraction, which matched market expectations in a Reuters poll, was also Brazil's largest since 1990, when the country was struggling with hyperinflation and a debt default. The outlook for 2016 is nearly as bad, with a central bank survey forecasting a 3.45 percent contraction.

Back-to-back annual drops of that magnitude would amount to the longest and deepest downturn since Brazil began keeping records in 1901.

Brazil is "replicating the lost decade of the '80s in just two years," Goldman Sachs economist Alberto Ramos said in a research report. He added that the economy was close to an outright depression, as defined by the length of the current downturn - nearly two years - and the more than 7 percent GDP drop experienced during that time.

A paralyzing political crisis, rising inflation and interest rates and a sharp drop in prices of key commodity exports have formed a toxic cocktail for Latin America's largest economy. The disastrous burst of a major mining dam and the biggest oil strike in 20 years added further strain in 2015.

Brazil's government said the downturn had been expected and added that it was focused on boosting the economy this year. "The government has taken all the necessary measures for an economic recovery," the Finance Ministry said in a note.   Continuación...