Brazilian bank forecasts economic contraction of 3.6 pct for 2015

Brazil's gross domestic product (GDP) would contract 3.62 percent year on year in 2015, said the central bank Monday.

The bank made the forecast based on a poll among financial institutions to gauge their expectations about the economy. The poll shows that Brazil may face its worst economic downturn in 25 years, since its economy contracted 4.35 percent in 1990.

Brazil's GDP shrunk by 4.5 percent in the third quarter of 2015 compared with the same period last year, the country's statistics bureau said.

The poll by the central bank also shows that those financial institutions predict a 2.67 percent drop in GDP in 2016, which would mark the first time the South America's largest economy contracted two years in a row.

It also forecasts that inflation will rise by 10.6 percent in 2015 and 6.6 percent in 2016 respectively, easily surpassing the government's ceiling of 4.5 percent.

Analysts said that this gloomy outlook on inflationary pressure stems from the devaluation of the real and rise in prices for telephone, water, energy, hydrocarbons and transport.

This negative picture is also likely to drag down foreign direct investment, which is predicted to reach 62.3 billion U.S. dollars in 2015 and drop to 55 billion U.S. dollars next year. Endi