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Brazil markets see 3.6% recession in 2016

[SAO PAULO] Brazil's political crisis is increasing pessimism about Latin America's largest economy on the markets, which now expect a recession of 3.6 per cent this year, the central bank said Monday.

The forecast was based on a weekly survey of 100 analysts and traders. Until now the projection had been for a contraction of 3.54 per cent.

Brazil is facing deep uncertainty as leftist President Dilma Rousseff fights impeachment proceedings, mass protests and an explosive scandal at state oil company Petrobras.

Brazil's economy contracted 3.8 per cent last year, and a second year of recession would be the worst slump since the Great Depression.

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The central bank survey found markets were expecting a return to modest growth of 0.44 per cent in 2017.

The International Monetary Fund forecasts Brazil's economy will contract 3.5 per cent this year and post zero growth in 2017.

A symbol of the emerging markets boom in the 2000s, Brazil is today reeling from the political crisis, low oil prices and its downgrade to junk status by the big three international ratings agencies.

The country, which will host the Olympics in Rio de Janeiro in August, has been rocked by the Petrobras scandal, in which a Who's Who of powerful figures are implicated, as well as top leaders in the ruling Workers' Party, which has governed Brazil for the past 13 years.