Growth concerns come to the fore

The past month has seen renewed concerns about the growth outlook for much of Latin America. GDP in the region grew by just 1.1% y/y in Q2 and the available data so far point to a similar pace of expansion in Q3. In response, the authorities in several countries have started to loosen policy. Chile has announced plans for a fiscal stimulus, while Peru's government has put forward a series of reforms aimed at kick-starting growth. This should help to cushion the downturn in these countries, but growth across the region more generally is likely to remain subdued. A common problem is that the tailwinds from the last decade’s commodity boom have turned into headwinds – commodity prices have suffered fresh falls in recent weeks. On top of this, structural constraints are holding back growth in several countries, notably Brazil. The one bright spot remains Mexico, where recent data suggest that growth has picked up, helped by a strengthening US economy.