Brazil will raise its minimum wage by nearly 12 percent from January 1, 2016, despite the downturn in the local economy, Chinese state-run news agency Xinhua reported.

The monthly minimum wage for Brazilian workers will rise from 788 reais (US$204) to 880 reais. The rate of increase outpaces the nation’s recent inflation rate, which stood at 10.28 percent, the news agency said.

The hike would have a direct impact on more than 40 million workers and retirees in the South American nation, the Brazilian President, Dilma Rousseff, was quoted as saying on Tuesday. The percentage increase was calculated based on the economic performance of Brazil over the last two years and in its annual inflation over that period, she added.

The move came amid news that the Brazilian economy is poised to record consecutive years of decline. Analysts polled by Brazil’s central bank said this month the economy of the South American nation would contract by 3.7 percent this year, financial news agency Bloomberg reported. The decline would be narrowed to 2.81 percent in 2016, estimated the analysts.