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Brazil IPCA (Dec.)

The fall in Brazilian inflation to a four-month low of 10.1% y/y in December confirmed that the recent food and energy inflation spikes are starting to unwind. But with the headline rate still far above target – and inflation in some core goods and services categories continuing to rise – Copom will deliver another large rate hike (of 150bp, to 10.75%) when it meets next month.
William Jackson Chief Emerging Markets Economist
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Latin America Economics Weekly

Chile’s new constitution, Brazil’s improving finances

Some of the doubts over Chile’s political system have eased after the Constitutional Convention completed a draft of the new charter, but political risks remain high for now, which may keep the peso on the backfoot in the coming months. Elsewhere, while the Brazilian government’s budget deficit has continued to narrow, we don’t think the country’s fiscal troubles are over for good. LatAm Drop-In (26th May, 10:00 ET/15:00 BST): Join our 20-minute briefing about Colombia’s election and other regional political and fiscal risks – including Lula vs Bolsonaro in October. Register here.

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Latin America Data Response

Chile GDP (Q1)

The 0.8% q/q contraction in Chile’s GDP in Q1 suggests the economy is coming back down to earth after a stellar 2021, and there is a growing chance of a recession this year. Meanwhile, the current account deficit widened to a worryingly large 7.3% of GDP, making the economy especially vulnerable to a further tightening of external financial conditions.

18 May 2022

Latin America Economics Update

Colombia’s economy to beat expectations this year

The solid 1.0% q/q rise in Colombia’s GDP in Q1 suggests the economy came through the Omicron virus wave in good shape and, given the recent surge in oil prices, we expect above-consensus growth of 6.0% this year. That said, a possible victory for interventionist Gustavo Petro in the upcoming presidential elections may weigh on investment and growth further ahead. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

17 May 2022

More from William Jackson

Latin America Data Response

Brazil Industrial Production (Nov.)

The 0.2% m/m fall in Brazilian industrial production in November, taken together with the weak surveys for December, suggests that the sector probably knocked 0.1-0.2%-pts off q/q GDP growth in Q4. There’s a very real risk that overall GDP contracted again last quarter.

6 January 2022

Latin America Data Response

Brazil & Mexico Mid-Month CPI (Dec.)

The fall in Brazilian inflation, to 10.4% y/y, in mid-December is likely to be followed by further declines in the coming months. Inflation in Mexico edged up in the same period, to 7.45% y/y, but we also expect it to drop back early next year. Nonetheless, we think that central banks in both countries will maintain their current pace of tightening with rate hikes of 150bp and 50bp respectively in February.

23 December 2021

Middle East Chart Book

Gulf governments to keep fiscal policy tight

Governments across the Gulf have begun to unveil their 2022 budgets and tight fiscal policy remains the order of the day. Saudi Arabia outlined a 6% cut in spending next year that is expected to push the budget into surplus for the first since 2013. And while Oman and Qatar both project small increases in expenditure in 2022, these are set to be more than offset by stronger revenues. The emergence of the Omicron variant has weighed on oil prices in recent weeks and, if we’re right in expecting them to fall further next year, the window that had opened up to loosen the purse strings will close. Tight fiscal policy will hold back recoveries in non-oil sectors, and we suspect that Oman and Bahrain will have to rely on financial assistance from the rest of the Gulf to avoid devaluations and defaults.

15 December 2021
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