Por: Ricardo Aceves, Senior Economist*
Latin America has been in recession for almost two years and it looks likely that come the end of this year, the Latin American economy will have been in recession for a second consecutive year for the first time since the "Lost Decade" of the 1980s. But could it be making a triumphant return to the top in 2017? We take a look at the latest on the economy of Latin America below.
Recession persists but signs of improvement emerge
Latin America’s ongoing adjustment to low commodity prices and domestic political turbulence in each country continue to shape the region’s growth performance and its near-term outlook. An estimate produced by FocusEconomics signals that the region’s protracted economic recession persisted in the third quarter, although it is showing signs of waning. GDP is expected to have contracted 0.6% annually in Q3, which followed a 0.9% decrease recorded in Q2. The result suggests that mild signs of improvement are emerging, though economic activity in the region remains weak.
In Brazil, data suggests that the recession continued to abate in Q3, after GDP had recorded the smallest fall in one year in Q2. In Argentina, which has also been in recession, recent economic indicators suggest that growth is stabilizing. In Mexico, preliminary data showed that the economy continued to expand in Q3, yet the pace of expansion was the weakest in over two years and the economy remains in low gear. The Peruvian economy, on the other hand, continued to expand at a solid pace, driven mainly by supply-side factors such as the maturing of large mining projects. Chile and Colombia, which were former regional strong points, showed signs of losing momentum.
Decline in regional growth will bottom out this year
In an environment of low commodity prices, subdued global growth and financial market volatility, Latin America is projected to contract 0.6% this year after having stagnated in 2015. This month’s outlook was cut by 0.1 percentage points relative to last month’s LatinFocus Consensus Forecast. Economic growth is expected to bottom out this year and to rebound strongly to 1.9% in 2017, as the global economy gradually picks up momentum and global trade strengthens.
Downside risks to the outlook continue to loom on the horizon. External risks may materialize in the form of weak growth in the U.S. economy and China’s transition to a consumption-led economy, which could delay the region’s export recovery. Financial risks may result from the results of the U.S. elections, the market reaction to the likely Fed interest rate increase in December, and signs that monetary policy in other developed economies may become less accommodative.
Looking at the countries in the region, economists maintained the 2016 growth projections for 7 of the 11 economies surveyed, including Brazil and Mexico—which together account for nearly 60% of the region’s economy. Ecuador and Paraguay were the only economies for which analysts raised their projections, while growth prospects for Argentina and Venezuela deteriorated again this month.
*Fuente: FocusEconomics. 10-Nov-16.
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