Brazil Economic Rout Deepens as Investment Shows No Rebound

Brazil’s economic rout deepened in the fourth quarter as investors and consumers remained on the sidelines amid government austerity measures that marked a disastrous year of corruption and recession.

Gross domestic product contracted 0.9 percent in the final three months of 2016, its biggest decline in a year, after a revised 0.7 percent drop the previous quarter, the national statistics institute said Tuesday. That was worse than the median estimate for a 0.5 percent decline from 46 economists Bloomberg surveyed, and lower than all but four of their forecasts. For the full year Brazil contracted 3.6 percent.

Amid the biggest bribery scandal in the nation’s history, Brazil’s economic and political crisis has decimated both investment and consumption, while unemployment has now reached record levels. An economic recovery may remain elusive even as President Michel Temer wins investor praise for efforts to shore up Brazil’s finances, and plunging inflation allows the the central bank to lower borrowing costs.

“The report confirms there is a lot of idleness in Brazil’s economy,” Cristiano Oliveira, chief economist at Banco Fibra, said by phone. “The central bank has a lot of room to accelerate key rate cuts.”

Swap rates on the contract maturing in January 2019 rose two basis point to 9.68 percent at 11:32 a.m. local time in Sao Paulo. Brazil’s currency, the real, gained 0.68 percent to 3.1162 per U.S. dollar.

Moments after the GDP figures were released,…