Latin America Economic Forecast

Economic Snapshot for Latin America

January 22, 2020

After a subdued 2019, regional growth is projected to gain some pace this year on stronger activity in heavyweights Mexico and, especially, Brazil. Rising domestic demand will underpin the overall expansion, helped by supportive monetary policy and improving sentiment. Still-lingering trade tensions, domestic policy uncertainty and social discontent remain key risks to the outlook.

Latin America Monetary & Financial Sector News

Regional inflation ended 2019 at a six-month high of 7.9% (November: 7.4%). Lackluster economic conditions have largely kept inflation in check in most countries of the region. The stark exceptions remain Argentina and Venezuela, while core inflation has proved sticky in Mexico. Inflationary pressures are seen subsiding further this year on modest activity growth.

The central banks of Brazil and Mexico continued to cut rates in December as inflation remained within target. Notably, Chile’s monetary authority stayed put to prevent further currency depreciation, while Argentina’s new policymakers lowered the rate floor again in January to stimulate the economy. Central bankers are seen loosening policy further this year.

Most of the region’s currencies appreciated against the U.S. dollar in recent weeks, supported by optimism over the “phase one” U.S.-China trade deal signed in mid-January. Meanwhile, Brazil’s real lost ground on weak economic data as did the Chilean peso on continued caution after last year’s protests. Currencies are seen weakening this year, albeit less so than in 2019.

 

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