The fall in gross domestic product (GDP) exceeded the 3.5 percent decline seen in 2015, and in absolute terms it was the biggest decline since 1990, when the economy retracted 4.35 percent.
According to the IBGE report, 2020's performance interrupted the economic growth Brazil saw between 2017 and 2019, when GDP grew 4.6 percent in three years.
In the fourth quarter of 2020, the Brazilian economy expanded 3.2 percent compared to the previous quarter.
Brazil's GDP in 2020 amounted to 7.4 trillion reals (1.3 trillion U.S. dollars), while per capita GDP registered 35,172 reals (6,170 dollars), a 4.8 percent decline in real terms.
COVID-19, which was detected in Brazil on Feb. 26, 2020, reduced economic activity to record low levels, due to a series of lockdown measures imposed by Brazilian states as of March 24.
A breakdown by sector shows the services sector, which accounts for 60 percent of economic activity, fell 4.5 percent while industrial output dipped 3.5 percent.
Only the agricultural sector saw some growth, expanding by 2 percent, driven by external demand for two top export products, soybean and coffee, both of which registered record outputs.
Household consumption hit a record low, falling 5.5 percent last year compared to 2019.
Imports plunged by 10 percent and exports declined by 1.8 percent, while government spending decreased by 4.7 percent and investment by 0.8 percent.
Brazil's financial market has forecast economic growth of 3.29 percent in 2021.