Latin America

Latin America Economic Outlook

Latin America Economic Outlook

Not all doom and gloom

Virus outbreaks are easing in much of Latin America which should support activity in the near term. And while vaccination coverage is still weak in most of the region, suggesting there is still a clear risk of further virus waves, economies are becoming increasingly resilient on this front. We think that the pace of the regional recovery will beat most analysts’ expectations in the coming years. Further monetary tightening lies in store but, with headline inflation rates set to drop back in 2022, interest rates probably won’t rise as far as investors are currently pricing into financial markets. Meanwhile, political risks are likely to grow over the coming year, raising debt concerns and putting local financial assets under pressure.

19 July 2021

Latin America Economic Outlook

A slow and bumpy path to recovery

Severe COVID-19 outbreaks across Latin America will put a brake on the region’s economic recovery in Q2. While we’re more optimistic than most that the rollout of vaccines will boost output later this year and in 2022, we still think that Latin America will emerge from this crisis in worse shape than other EM regions. Central banks will keep monetary policy looser than is currently priced into financial markets.

22 April 2021

Latin America Economic Outlook

Vaccines won’t heal all scars

While vaccines offer Latin America a route out of the crisis, lingering public debt issues will hold back the regional recovery and raise the risk of long-lasting economic scarring. As a result, after a sharp 6.9% drop in 2020, we expect a modest 5.0% rebound in Latin America’s GDP this year, and 3.4% growth in 2022. These forecasts imply that the recovery will be slower than in most other EM regions, with output remaining well below its pre-crisis trend in the coming years. One consequence is that interest rates will remain low for longer than most expect. We’re more optimistic on the outlook for the region’s financial markets and currencies, but the threat of a populist shift in this year’s wave of elections poses a major risk.

26 January 2021
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Latin America Economic Outlook

An uphill struggle

The picture has brightened for Latin America as new COVID-19 cases have fallen from their peaks, which should allow governments to ease restrictions and provide a boost to economic recoveries. Even so, with the number of new cases still very high and austere fiscal policy likely from 2021, output across the region will remain well below its pre-crisis trend over the next few years at least. Chile should be a relative outperformer; Mexico and Argentina are likely to lag behind. Large output gaps should have a disinflationary effect and central banks are likely to keep monetary policy loose for longer than is currently discounted in financial markets.

Latin America Economic Outlook

Lagging behind

The failure to contain the coronavirus and the small size of fiscal support in some countries mean that Latin America will have the weakest recovery of any region globally. Brazil, Mexico and Colombia are likely to be the worst performers, while Chile and Peru should fare better. Despite the poor economic outlook, Latin America’s financial markets are likely to outperform in the coming quarters as global risk appetite recovers.

23 July 2020

Latin America Economic Outlook

Brazil and Mexico to come out worst

The downturn in Latin America this year will the deepest since reliable records began. The slow policy responses in Brazil and Mexico, as well as struggles to bring their coronavirus outbreaks under control, suggest that the economic consequences will be more severe there than in Chile, Peru and Colombia. Our forecasts for GDP growth are generally more downbeat than the consensus’ and the IMF’s. Meanwhile, the fiscal costs of the crisis may prompt Mexico’s government to stop supporting the national oil company, Pemex, and are pushing Argentina’s government towards a disorderly debt default.

24 April 2020

Latin America Economic Outlook

A fitful recovery

Growth in most Latin American economies should strengthen in 2020, but we expect that these recoveries will be slow and fragile. Indeed, the region is likely to be the worst performing part of the emerging world again this year. Inflation will probably rise across much of Latin America, meaning that monetary easing cycles in most countries are at or near an end. That said, with the exception of Mexico, our interest rate forecasts are generally lower than most analysts are expecting.

Latin America Economic Outlook

Slow regional recovery, Argentina headed for default

After a weak 2019, we expect that growth across most of Latin America will improve next year. That said, our forecasts for the regions two biggest economies – Brazil and Mexico – are below consensus. And Colombia and Argentina will miss out on this tepid recovery. The latter now almost certainly faces a painful debt restructuring regardless of the result of October’s election. Inflation problems will persist in Argentina and Venezuela, but inflation in the rest of the region will probably be lower in 2020 than it has been since the 1960s. Monetary policy is set to be loosened in most places, with the exception of Colombia.

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