Weak growth to make fiscal challenge harder

The economies of Latin America started the year on the front foot, but the strong growth rates recorded in early 2024 are unlikely to be sustained and growth in many parts of the region is likely to be soft in the coming quarters. This is especially the case in Brazil and Mexico whose economies will underperform the Andes and disappoint consensus expectations in the next couple of years. Stubborn underlying inflation pressures will limit the extent of rate cuts and monetary policy will be kept tighter than most expect. Slow growth, high borrowing costs and insufficiently tight fiscal policy means that public finance risks are likely to return to the spotlight.