Regional recovery to be slow-going

After a terrible start to the year, we expect economic growth in Latin America to pick up over the next 12-18 months. However, recoveries in most cases will be weak. Indeed, our GDP forecasts for many countries, including the region’s two biggest economies – Brazil and Mexico – are below consensus. And in the region’s third biggest economy, Argentina, we are now explicitly forecasting a sovereign debt default, regardless of October’s election outcome. The outlook for monetary policy is mixed, but interest rates in Brazil and Mexico will be cut, and stay lower for longer than the markets are pricing in.