New forecasts, limited policy responses

It now seems likely that the effects of the coronavirus will take a heavier toll on Latin American economies than we previously thought, so we’ve revised down our 2020 growth forecasts across the region. We now expect that Brazil’s economy will expand by just 0.5% and that Mexico’s will contract by 0.5% this year. The sharp falls in currencies this week will make central banks more reluctant to cut interest rates over the next couple of weeks, and governments have limited room to provide fiscal stimulus.