Weathering the Trump storm

We expect economic growth in Latin America to accelerate over the coming years as the effects of the downturn in global commodity prices fade, policy is loosened and financial conditions ease. Having contracted by 1.5% in 2016, we expect the region’s economy to grow by 1.5% in 2017 and 2.5% in 2018. At a country level, our GDP forecasts for Brazil are now above the consensus but we remain below consensus on Argentina, Colombia and Chile. In Mexico, growth will remain subdued but the early signs are that the economy is unlikely to collapse in the face of any shift in US policy under President Trump. Inflation looks set to slow further in most countries, meaning interest rates have further to fall. Mexico is a notable exception. Here we expect interest rates to be hiked further over the next six months, but then to be cut at the start of 2018 as inflation begins to fall.