Latin America Economic Forecast

Economic Snapshot for Latin America

March 17, 2020

Regional growth prospects were slashed this month as the fast-spreading coronavirus wreaks economic havoc worldwide. Although activity is still seen strengthening somewhat this year, the outlook is bleak given the virus-inflicted disruptions to global supply chains and trade; downturn in commodity prices; volatility in financial markets; and stress to public health systems.

Latin America Monetary & Financial Sector News

Regional inflation slipped to 7.8% in February (January: 8.0%). Economic slack has largely kept price pressures contained in most countries of the region. The stark exceptions remain Venezuela and Argentina; notably, inflation in Argentina slowed to an over one-year low in February. Inflation is expected to subside ahead, though currency weakness represents an upside risk.

In March, Argentina’s monetary authority lowered the rate floor yet again to stimulate the economic recovery, while Peru’s Central Bank stood pat. Meanwhile, the recent global asset market turmoil and collapse of currencies across the region prompted the central banks of Brazil, Chile, Colombia, Mexico and Uruguay to intervene in the FX market.

Major regional currencies plummeted against the U.S. dollar recently amid the plunge in international crude prices and market panic over the spread of Covid-19 globally and its impact on economic activity, with the Brazilian real, Colombian peso and Mexican peso being the worst hit. Currencies are seen losing ground this year compared to 2019.

 

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